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The Maddison Project is probably the world’s most comprehensive source of economic history statistics. Begun by British economist Angus Maddison, it was continued after his death in 2010 by an institution at the University of Groningen.
Recently, an update for 2018 has been released.
Background paper: https://www.rug.nl/ggdc/html_publications/memorandum/gd174.pdf
It was accompanied by a major introductory article at Voxeu – Rebasing ‘Maddison’: The shape of long-run economic development:
Compared to the traditional Maddison method of extrapolation from a single, modern-day observation, the new ‘cross-country’ measure gives substantially different relative income levels. …
The figure compares the level of real GDP per capita relative to the US for the year 1870 based on the new ‘cross-country’ measure and on an extrapolation-based measure. The extrapolation-based measure suggests that the UK and the Netherlands had substantially higher income levels than the US, but the new measure shows that the UK and US were at similar levels, and the Netherlands was much closer to France.
The figure also shows that the difference between the two measures varies considerably across countries, with hardly any difference for Argentina or China, a lower comparative level for Brazil, and a higher comparative level for India.
It was also picked up by Unz.com commenter Polish Perspective:
The New Angus Maddison Database update (2018) is out! It is a big update with a lot of methodological re-working. It seems quite credible to my mind, for instance Turkey’s GDP per capita (PPP-adjusted) is 18K in 2016. The official Turkstat number on the same metric is closer to 24K, but that is largely because they cook their numbers. India’s GDP per capita is also lower, which is also congruent with criticism from many Indian economists about the unreliability of Indian GDP data. China’s number is also somewhat lower, but not nearly as much of a downward revision as for Turkey or India, which gels with I have written for some time now. They all cook their numbers but China does it less than Turkey(worst offender) or India(pretty bad).
The discrepancy between Maddison and their official numbers will be funny to watch.
What is more fascinating is that Russia’s GDP per capita was moving up very rapidly up until 1970s, this is common knowledge, but according to the latest database revision, Russia was actually quite close to Norway up until the 1970s after it had a period of stagnation and then of course the disastrous 1990s.
It makes you think: if Russia had moved to a Chinese reform system in the early 1970s, it’s per capita GDP could well be at Scandinavian levels. It was able to do very well up until the 1970s at the very least in PPP-adjusted terms.
This doesn’t sound very plausible to me.
Throwing up a few quick Excel graphs:
Russian GDPcc increases across the board, going from a consistent ~20% of US levels throughout most of the 20th century in the old revision, to ~40% during Tsarist times, and peaking at ~60% in the 1970s.
The highest academic estimates of Soviet GDPcc as a percentage of American I have seen prior to this are 50%, and that’s of course not adjusting for goods in centrally planned economies being less well tailored to consumer preferences (“consumers would sacrifice 12-15% of their income to get in exchange the possibility of choice in a free market” – Jose Luis Ricon, citing research).
It is also very strange that Russian GDPcc is essentially equivalent to Soviet GDPcc, whereas virtually all prior research I’ve seen suggests that the RSFSR was significantly (10%-20%) higher than the Soviet average. Though this wasn’t necessarily reflected in living standards, since the RSFSR and probably the BSSR significantly subsidized the other republics.
We are to believe that Finland was actually less developed than the Russian Empire as a whole prior to the October Revolution. This is complete nonsense.
The Austro-Hungarian Empire as a whole was more developed than the Russian Empire. But the graph above refers to just Austria, in turn the most developed part of the Austro-Hungarian Empire – and, consequently, far more developed than the Russian Empire.
The USSR was also supposedly slightly richer than Italy, at the level of countries such as Austria and Finland, and only marginally behind the UK, France, and Germany as late as the early 1980s.
This is highly unlikely what we know of Soviet consumer poverty, even adjusting for Soviet consumption being highly constricted by massive military spending, investment into the industrial stock, and the inherent inefficiencies of distribution under central planning.
The main point it has going for it is that it is far more in sync with current estimates of GDPcc (PPP) between Russia (around $28,000 according to the IMF) and the developed world (~$50,000).
Is what is driving things oil/energy prices? It sort of looks like USSR was following oil prices up until 1982 when Volker’s fed + Regan tax and regulation policies collapsed the price of oil. This seems the pattern for Tsarist Russia too.
The USSR maybe did not understand the problem and tried to keep things going with military spending. The fate of the US might be the same. The US does not understand the rise of China and is trying to keep things going with military spending. The problem with China is not their military it is their civil engineers. While railroads collapse in New Jersey, China builds them in Nigeria.
Embarrassing story my father related to me about conditions in the 1960s in Sweden as opposed to the USSR.
The Soviet Union leased the GAZ Volga to Swedish taxi operators at below-market rates. The lease lasted two years, and it was reasonably popular owing to the subsidy.
After the lease was up, the now much-depreciated vehicle was shipped back to Leningrad and provided to some poor Russian son of a bitch who scrimped and saved and paid the full cost for the car years in advance.
No doubt Martyanov, the Faker, and other expatriate Russians living in the United States will extol the glories of such a brilliant economic system.
But to play the devil’s advocate: by the mid 1960s the Soviet Union, with a comparable population, overtook the United States in the production of oil, steel, and cement. I realize the service sector was pitiful and that Soviet goods and construction required greater inputs of raw materials, but some kind of upwards revision is possible.
I think your assumptions about the effectiveness of capitalism and planned state economy are too broad.
Capitalism is more efficient only when there is a truly free market and actual competition between a high enough number of players, instead of monopolies and cartels.
It’s better at producing a variety of consumer goods but to this day, the Russian state-owned MIC is several times more efficient than the privately owned US MIC.
Many types of companies, especially big natural monopolies and strategic industries should be owned by the state or at least have mixed state and private ownership.
Germany and Japan have for instance traditionally tolerated or even encouraged cartels.
The old AT&T in America provided superb service at a reasonable price (given the technology of the time).
The most important advantage of capitalism compared to socialism appears to simply be firm entry/exit.
That's not to say monopolies are good or should be promoted either.Should General Electric and Siemens be state-owned?
Public ownership has a dim record outside of natural monopolies or products where the state itself is the sole customer.
The basic reason isn't hard to understand--public ownership eliminates the hard budget constraint.
The French appeared to do a bit better with it than most, and in Italy ENI was very successful.
What is most important imo, is market clearing in a given economy and the scale of the country probably plays an even bigger role. How fast can you set up/liquidate a business, that is mostly how fast do the courts work, how strong are the repo-men and how unregulated the prices are. If you can set up a business easily and enter a field without much regulatory limitations, monopolies don't really matter. In a big country (even small) however, large firms, or quasi monopolies become almost automatically so called 'strategic assets' and are given some degree of protection (that is the remnant war economy mentality) so that given sector of the economy becomes quasi planned.
That said, I personally don't like comparing USSR to anything, ever, besides considerations for a potential war economy, that is things like steel production, machinery in general, energy resources, human capital etc. Some might say that is all that really matters, but that is a different debate.
As for the MIC, I think it is more complicated. I might be wrong, but my guess is that in the US, the employment in the sector is a more significant part of the economy then in Russia and what's more, the various productions are setup nationwide and become a significant budget allocation battlefield where there is much bipartisan agreement. The spending so becomes really a gov. subsidized employment program(welfare), such as coal extraction and drives the prices up significantly. Note that in the US, it is not only a problem in the MIC but for instance in infrastructure as well. There was a story in NYT a while back about tunnel drilling for the subway in NYC and the prices paid were 5x!! that of EU avg. if I recall correctly. It come down to a interest group showdown where the construction unions for example, pushed through legislation, such as mandatory allocation of night shifts work hours etc.
Actually this makes sense. Finland was generally quite a backward place prior to the revolution, and for some time after.
Perhaps there is something you don’t know about it? I was there and 50-60% of the US level in the 1970s looks plausible to me.
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Incidentally, your line charts are hard to read. You should place the labels on the right next to the lines. Something like this:
But still, there is something very wrong with economic data that is not showing a massive transformation in Finland. In 1850 Finland was 95 % rural with the largest "city" being Helsinki with only 20,000 people. In 1917 Helsinki had grown ten-fold to 200,000 people and the country was dotted with entirely new industrial cities in the 20,000-50,000 range around waterfalls that were turned into power plants.
The Bank of Finland historical data that I googled has Finland as the fastest growing economy in Europe from the 1860s to 1917, starting from the liberalization and market reforms after the Crimean War.
I will concede that Russia, or USSR in this instance, is the big outlier here. But for most economies in the world, the new numbers are much more in line with their fundamentals.
For instance, if we take China, they have incorporated Harry X. Wu’s excellent 2014 paper on Chinese productivity and GDP statistics.
That was a brave decision. People need to understand the background here. The IMF and the World Bank are mandated by their statutory rules to accept – at face value – whatever the corresponding national statistical agencies tell them. So when growth starts to sharply deviate from observed fast-moving indicators, they are powerless to say no. Maddison Project is under no such compunction, which is why you see these revisions.
The Chinese themselves have started to admit that some of their previous GDP statistics is a dubious quality. The official party line is that this is the work of “rogue provinces”, which conveniently washes the hands of the central command. Wu’s research is backdated to several decades, the paper itself came out four years ago now. However, even as late as 2015, there were substantial divergences in the economy. And then there is the fact that China’s GDP is clinically stable in a way which is simply not plausible for a modern economy.
India is of course another deviant. There is a very recent paper out from National Institute of Public Finance and Policy(NFPIP) which measures business cycles. Not interesting if you’re not into economics.
But whatis interesting is that they go over GDP measurement in India and basically trash it completely. Keep in mind, NFPIP is a government-funded institution in India. This is no rogue player. The paper can be read here . The relevant section is at the end. It’s not just them, either. India’s GDP has almost certainly been inflated by use of faulty GDP deflators.
Turkey is even more shocking, which is why they also got the biggest downgrade in the Maddison Database.
Why do I mention these? We have three cases where Maddison did downgrade compared to official statistics. India saw the smallest hit, probably because their cheating is relatively recent (2015). Turkey’s revisions have also been recent but more flagrantly false and also stretching back further in backwards revisions. China did see a hit as well.
All of these three revisions are A) plausible, because a large number of economists in all three countries are skeptical about their own growth figures. Though dissent in China is most fraught with danger whereas it is relatively easier to dissent in Turkey and India, especially the latter. B) They showcase that whatever flaws may be with USSR, it is the outlier and not the norm.
I’ll admit I know little of USSR’s economic history so I won’t rush into something with which I am badly equipped to debate. However, in order not to be completely boring I will venture a guess, it could have something to do with how the price level index is measured, or rather, estimated. Remember that ICP didn’t begin their first PPP survey up until the late 70s, and we didn’t have a good quality one until the mid-80s. Maddison famously used the 1990s survey as a baseline for his original database because he found too many flaws with the previous rounds. For previous data, you have to make more creative estimates and that is one potential source of error. Again, just a guess. It’d be interesting get to know the perspective of someone well-versed in Soviet economic history who could venture a guess. (Or we could just email the Maddison Project at University of Groningen and ask them head-on).
P.S. I apologise in advance for any spelling errors or poor grammar. I wrote this in one go and it’s simply too long to do any editing with my alarmingly low caffeine levels.
Compared to the previous Maddison database (the one using 1990 Geary-Khamis international dollars), Turkey has received an upgrade. Where as in the former database, in 2008 (the last available year) Turkish per capita GDP was $8000 and American GDP $31,000 - 25.8% of the American level - in the most recent database, in 2008 Turkey was at 33% of the American level.
The only 'downgrade' I can see is for 2016, when Turkish GDP inexplicably takes a 10% dive, despite the fact that there wasn't any recession in Turkey that year.
The same happens with Romania: the time series was correctly upgraded in the most recent database (vs the ludicrously low level reported in the former database), but inexplicably downgraded in 2016 by 8% - again, despite the absence of any recession.
Lastly, similar to the way the Russian level seems unaccountably inflated in the most recent database, the same thing happened to Serbian GDP: 150% of the total Yugoslav average in the late 80s and 90% of the Croatian level and 325% (!) of the Bosnian level. This seems to me absurdly high. Although Serbia was subjected to international sanctions throughout the entire 1990s, it is still difficult to believe its economy suffered very much more than Croatia's or Bosnia's (both of whom were ravaged by war, unlike Serbia itself). Yet by 2005 both Croatia and Bosnia (like Romania and Bulgaria also) had recovered their previous GDP highs, while Serbia even in 2016 still languished far below its supposed level of 1988. Since the Serbian level in 2016 reported in this dabatase is much more in line with PPP estimates made by the World Bank, IMF and CIA for 2016, I think the Serbian time series in the Maddison Project is way off base.
Agreed.
And isn’t China official GDP (both nominal and PPP) possibly, if anything, underestimated? Looking at certain consumption indicators, like internet penetration, smartphone users, box office size and even their scientific output.
And how do you in any way objectively measure that? To what extent are different countries faking their GDP numbers? Most countries don’t do that at all, or what? Because there are some really extreme opinions (and they are nothing more than that, just BS most of the time), like how China’s economic growth is supposedly only at 4% per year, etc.
Although I have to say that Turkey’s PPP GDP per capita seems to be atleast slighty too high. It’s almost as high Russia’s, Latvia’s, Hungay’s and even Poland’s. While I don’t doubt that Turkey is quite a bit more developed than countries such as Brazil and Mexico, Turkish per capita GDP should maybe be something like 20-24K. Turkey also doesn’t have a very high HDI, in fact it’s not even close, unlike all those EE countries I listed. So I guess Polish Perspective is onto something…
Also, can someome explain me why Kazakhstan’s economic growth was much higher last year than Russia’s (apparently)? Isn’t Kazakhstan actually considerably more dependent on oil prices in capita terms, and that’s the only reason why they are comparable to Russia in living standards (they have a low level of human capital after all)?
Russia’s high interest rates should mostly explain that? That’s certainly the case according to many. The Russian slowdown during the second half of last year was really quite severe, and IMO, unexpected (1.4% GDP growth for the whole year, slower manufacturing growth than in 2016 (!), negative GDP growth in November…)
It's an interesting topic. I would answer it by comparing the US and Poland. Poland in 2016 had a (PPP-adjusted in constant currency) per capita income of 26K. In 1990, the US had a per capita income of 37K(!) using the same definition.
In other words, the US in 1990 was a significantly richer country than Poland is today, even using PPP which is flattering for Poland. Using constant-currency nominal GDP per capita makes it brutal.
However, all that being said, despite Poland being substantially poorer today than the US was in 1990, Poland already has higher life expectancy and lower under-5 mortality rates than the US had back then! So we have surpassed their health indicators at a much lower income level. In fact, Poland has lower under-5 mortality today:
https://i.imgur.com/wLpTG0m.png
We're talking about a country half as rich as the US is today. Yet being able to produce a safer environment for its newborn. This is not because "Polan Stronk!", however much my compatriots would like to imagine it.
Rather, I think, it is because we are seeing a slow decoupling from GDP with regards to human progress. Or maybe one could phrase it another way: we're seeing an increased productivity between the relationship of economic growth and human progress. So what required more growth in the past in order to get a certain positive outcome for the general population today requires far less. This would be great news, if true.
And there are reasons to think this hypothesis is true. For instance, a quite poor country like India has a per capita income in the high 5000s according to Maddison database, yet their life expectancy is very close to where the US was in 1960. I'm sure the US wasn't as rich as we imagine it to be in 1960 but I am also sure it certainly wasn't as poor as India is today.
Nor is India a paragon of social efficiency, to put it mildly. It spends a relatively low amount of its GDP on health expenditure, certainly much lower than Vietnam and has very bad malnutrition rates, worse than most Sub-Saharan African countries. Vietnam has a life expectancy of 75.78(!!!) according to the World Bank, despite a per capita income which is almost certainly lower than what the US had in 1968.
So, we're simply seeing increased outcomes of growth, even for laggards like India. I think a lot of analysts who overstate Chinese GDP with various anecdotes like smartphone or internet penetration do this basic miscalculation. We've seen costs fall dramatically for technology in the last few decades and it simply requires lower incomes and lower growth to get the same rates that took much higher incomes in the West in previous era. (Of course, you'd have to substitute smartphones for something similar for previous decades). It's probably the same mechanism at work which is giving developing countries much better health outcomes at much lower incomes.
I wouldn't say that they are richer per se. I would say that they are getting more out of lower growth and lower incomes than did the West in previous eras. Since this pattern is global, it appears to be a generalised trend rather than some genius move by a single set of countries.
Of course there is also the possibility that we are mismeasuring GDP, though one does not have to exclude the other. It's perfectly possible that both happen at the same time. When it comes to mismeasuring GDP, I think professor Diane Coyle's argument is quite compelling.
Capitalism is more efficient only when there is a truly free market and actual competition between a high enough number of players, instead of monopolies and cartels.
It's better at producing a variety of consumer goods but to this day, the Russian state-owned MIC is several times more efficient than the privately owned US MIC.
Many types of companies, especially big natural monopolies and strategic industries should be owned by the state or at least have mixed state and private ownership.
Not convinced either of these claims are accurate.
Germany and Japan have for instance traditionally tolerated or even encouraged cartels.
The old AT&T in America provided superb service at a reasonable price (given the technology of the time).
The most important advantage of capitalism compared to socialism appears to simply be firm entry/exit.
That’s not to say monopolies are good or should be promoted either.
Should General Electric and Siemens be state-owned?
Public ownership has a dim record outside of natural monopolies or products where the state itself is the sole customer.
The basic reason isn’t hard to understand–public ownership eliminates the hard budget constraint.
The French appeared to do a bit better with it than most, and in Italy ENI was very successful.
The Japanese keiretsu and the Korean chaebols are much more than cartels. They are not bad models to follow but I was not referring to that.The US internet providers are the perfect example of the cartels I am talking about. Expensive and slow internet because there are 2-3 big players who don't really compete with one another and have cornered the whole market.
Thank you for making these graphs and reporting about this. Your opinions about the validity of the data however, from what I can tell, are backed by nothing more than “it doesn’t seem likely to me” (with no references that I can check, or anything). All things being even, as a non-expert, I’m more likely to be swayed by the side that looks like it has done the most work in making its case, and in this case you’re really not giving me much of a choice.
My big Soviet economy post is here.
Recommended background reading to get into this debate:
* The Socialist System (Janos Kornai)
* Red Plenty (Spufford)
* Ricon's recent book
* Start with this pair of excellent blogposts:
** http://crookedtimber.org/2012/05/30/in-soviet-union-optimization-problem-solves-you/
** http://chris-said.io/2016/05/11/optimizing-things-in-the-ussr/
Just to add to the price level index issue. Remember that even today, if you go to the World Bank database and type in “gdp per capita PPP”, you’ll only get numbers from 1990 and onwards. That’s no coincidence.
The reason for that is the same why Maddison chose the 1990 ICP round: the previous ICP surveys were too unrepresentative and poorly constructed. As an aside, It is notable that IMF has more of a loose standard and their PPP data goes back to 1980, which is right after the first survey was being conducted. But that says more of their less stringent standards than the World Bank. It is the latter, after all, which is now permanently hosting the ICP.
When you make long series of data, which is what the Maddison database does, and you have to estimate PPP-adjusted GDP per capita in a time when there was no ICP period, which is what is relevant for USSR in this instance, that is when various errors can crawl in. As Ravallion makes clear:
Even small changes, especially if they accumulate, will have a large cumulative impact.
I did stress the Turkish/India/China examples because it is important to underline that these revisions are often done with great care and the final result is often better than what you get if you take the national accounts at face value without any methodological or thorough refinements.
But, given that most of the errors in the latter examples are done post-1980 (when we have PPP data, especially post-1990) whereas the USSR inflation began largely before 1980, that is obviously an area of difference which could be (at least partly) cause to this error. Because even if the root causes of problematic Chinese growth accounting is not PPP-related, but rather productivity-related, you still have to deflate the GDP with an price level index.
The latest 2011 ICP round is quite solid and it is being updated backwards in time. But it doesn’t go as far back as we want it go for a historical database like Maddison, and if your measurement challenge is in the pre-1980 period (which it is for USSR) rather than for post-1980 like it is for China/Turkey/India, then that could be a (potential) factor.
But yeah, it would be useful to email them(the guys over at Groningen) directly or contact a Soviet Economic Historian because this is a fascinating question.
Couple more comments:
1. India’s historical numbers I notice are just bizarre. $1,400 per capita in the 1920s-30s, but only $1,500 in the 1930s, but declining to close to $1,000 by the 1980s.
I’m aware the economy of the Licence Raj was nothing to write home about… but as far as I’m aware, they did eke out miniscule per capita growth…
2. Turks buy 1 million cars per year as of 2016; that’s about as much per capita as Poles, and significantly more than Russia’s 1.4 million sales. Chinese buy 28 million (!) per year – almost twice as much per capita as Poles. Though AFAIK in Turkey and to a lesser extent China these are fueled by unsustainable credit booms.
I also recall Chinese reading urban salaries overtaking Russian ones soon after Russia’s devaluation; remarkably, Russia is now a cheaper country than China, so Chinese and Russian average consumer power should be comparable by now, I think. This ought to be especially impressive since China continues to maintain very high investment rates.
Even if the Chinese are fiddling the numbers for stability, could the numbers not be broadly accurate anyway?
as for the broad picture a quote from his latest blog:
Chinese assets are wildly overvalued. This stems in my opinion from a money supply that is vastly in excess of the size of the economy. The differences are enormous. In nominal exchange rate terms, the US economy is nearly 50% larger than the Chinese economy. However, Chinese RMB M2 is effectively twice as much as the USD for what is effectively the global currency. When put against the size of the economy, the numbers are even more striking. There is more than twice as much Chinese RMB as there is economy
(http://www.baldingsworld.com/2018/02/20/is-china-deleveraging-revisited/)
also his last article on a big insurer bailout in Bloomberg is rather revealing:
Anbang's annual life-insurance premium revenue increased from 1 million yuan to 114.2 billion yuan, or total growth of 11 million percent. Even during a period of rapid economic expansion, annualized growth of 593 percent is amazing.
The problem was that the life-insurance products were actually high-yielding debt instruments; investors could opt out of the insurance portion in as little as two years.
(https://www.bloomberg.com/view/articles/2018-02-26/xi-jinping-why-the-u-s-should-fear-china-s-new-emperor)
Vietnam / 93 mio / 2300USD GDPpc -> 270000 cars sold in 2017
Egypt / 96mio / 3600USD GDPpc -> 128000 cars
(Note: Both countries have assembly-factories and most of the cars sold locally are domestically assembled.)
Africa / 2800 billion USD -> 3.4 million motocycles sold in 2017
Vietnam / 215 billion USD -> 3.1 million
Whatever the reported numbers are, due better income distribution in East/South-East-Asia and many CIS states, they are probably much closer to the real ones.
IMHO It's not only the Turks fixing their numbers, but also the Arabs. If you start looking for poverty-data, you will only find decade-old numbers.
When we look at the African economies it's even worse. Nigeria became biggest economy in Africa after the president ordered a rebasing and jumped passed Egypt/South-Africa.
It would be great if an economist could somehow mix GDP-numbers with consumption/goods-basket-numbers.
I mean illegal migration, rebel-groups, terrorism and sky-high crime rates don't just appear out of nowwhere.
I'm not gonna claim to understand what the difference between the two is based on the descriptions give: "multiple benchmarks (suitable for cross-country income comparisons)" and "2011 benchmark (suitable for cross-country growth comparisons)".
The latter series is far more in line with the previous Maddison database I have, as well as with figures produced by The Conference Board's "Total Economy Database."
The cdgppc series is massively out of whack with any other data I've ever seen, so I just ignore it.
Germany and Japan have for instance traditionally tolerated or even encouraged cartels.
The old AT&T in America provided superb service at a reasonable price (given the technology of the time).
The most important advantage of capitalism compared to socialism appears to simply be firm entry/exit.
That's not to say monopolies are good or should be promoted either.Should General Electric and Siemens be state-owned?
Public ownership has a dim record outside of natural monopolies or products where the state itself is the sole customer.
The basic reason isn't hard to understand--public ownership eliminates the hard budget constraint.
The French appeared to do a bit better with it than most, and in Italy ENI was very successful.
Companies who compete on the global market and who have foreign competition cannot really be a cartel in the pure sense, unless they have captured a whole market on a global scale.
The Japanese keiretsu and the Korean chaebols are much more than cartels. They are not bad models to follow but I was not referring to that.
The US internet providers are the perfect example of the cartels I am talking about. Expensive and slow internet because there are 2-3 big players who don’t really compete with one another and have cornered the whole market.
It’s an update post, not a long analytical post.
My big Soviet economy post is here.
Recommended background reading to get into this debate:
* The Socialist System (Janos Kornai)
* Red Plenty (Spufford)
* Ricon’s recent book
* Start with this pair of excellent blogposts:
** http://crookedtimber.org/2012/05/30/in-soviet-union-optimization-problem-solves-you/
** http://chris-said.io/2016/05/11/optimizing-things-in-the-ussr/
And isn't China official GDP (both nominal and PPP) possibly, if anything, underestimated? Looking at certain consumption indicators, like internet penetration, smartphone users, box office size and even their scientific output.
And how do you in any way objectively measure that? To what extent are different countries faking their GDP numbers? Most countries don't do that at all, or what? Because there are some really extreme opinions (and they are nothing more than that, just BS most of the time), like how China's economic growth is supposedly only at 4% per year, etc.
Although I have to say that Turkey's PPP GDP per capita seems to be atleast slighty too high. It's almost as high Russia's, Latvia's, Hungay's and even Poland's. While I don't doubt that Turkey is quite a bit more developed than countries such as Brazil and Mexico, Turkish per capita GDP should maybe be something like 20-24K. Turkey also doesn't have a very high HDI, in fact it's not even close, unlike all those EE countries I listed. So I guess Polish Perspective is onto something...
Also, can someome explain me why Kazakhstan's economic growth was much higher last year than Russia's (apparently)? Isn't Kazakhstan actually considerably more dependent on oil prices in capita terms, and that's the only reason why they are comparable to Russia in living standards (they have a low level of human capital after all)?
Russia's high interest rates should mostly explain that? That's certainly the case according to many. The Russian slowdown during the second half of last year was really quite severe, and IMO, unexpected (1.4% GDP growth for the whole year, slower manufacturing growth than in 2016 (!), negative GDP growth in November...)
Measurement of GDP is something I’m passionate about – as you likely can tell – but yes, there are those who argue this based on satellite images as well as other more down-to-earth indicators(you mentioned some).
It’s an interesting topic. I would answer it by comparing the US and Poland. Poland in 2016 had a (PPP-adjusted in constant currency) per capita income of 26K. In 1990, the US had a per capita income of 37K(!) using the same definition.
In other words, the US in 1990 was a significantly richer country than Poland is today, even using PPP which is flattering for Poland. Using constant-currency nominal GDP per capita makes it brutal.
However, all that being said, despite Poland being substantially poorer today than the US was in 1990, Poland already has higher life expectancy and lower under-5 mortality rates than the US had back then! So we have surpassed their health indicators at a much lower income level. In fact, Poland has lower under-5 mortality today:
We’re talking about a country half as rich as the US is today. Yet being able to produce a safer environment for its newborn. This is not because “Polan Stronk!”, however much my compatriots would like to imagine it.
Rather, I think, it is because we are seeing a slow decoupling from GDP with regards to human progress. Or maybe one could phrase it another way: we’re seeing an increased productivity between the relationship of economic growth and human progress. So what required more growth in the past in order to get a certain positive outcome for the general population today requires far less. This would be great news, if true.
And there are reasons to think this hypothesis is true. For instance, a quite poor country like India has a per capita income in the high 5000s according to Maddison database, yet their life expectancy is very close to where the US was in 1960. I’m sure the US wasn’t as rich as we imagine it to be in 1960 but I am also sure it certainly wasn’t as poor as India is today.
Nor is India a paragon of social efficiency, to put it mildly. It spends a relatively low amount of its GDP on health expenditure, certainly much lower than Vietnam and has very bad malnutrition rates, worse than most Sub-Saharan African countries. Vietnam has a life expectancy of 75.78(!!!) according to the World Bank, despite a per capita income which is almost certainly lower than what the US had in 1968.
So, we’re simply seeing increased outcomes of growth, even for laggards like India. I think a lot of analysts who overstate Chinese GDP with various anecdotes like smartphone or internet penetration do this basic miscalculation. We’ve seen costs fall dramatically for technology in the last few decades and it simply requires lower incomes and lower growth to get the same rates that took much higher incomes in the West in previous era. (Of course, you’d have to substitute smartphones for something similar for previous decades). It’s probably the same mechanism at work which is giving developing countries much better health outcomes at much lower incomes.
I wouldn’t say that they are richer per se. I would say that they are getting more out of lower growth and lower incomes than did the West in previous eras. Since this pattern is global, it appears to be a generalised trend rather than some genius move by a single set of countries.
Of course there is also the possibility that we are mismeasuring GDP, though one does not have to exclude the other. It’s perfectly possible that both happen at the same time. When it comes to mismeasuring GDP, I think professor Diane Coyle’s argument is quite compelling.
I'm disappointed that the concept of "GDP" has these problems. It's very convenient to consult one single number to gauge the degree of economic well-being. Unfortunately, it seems to me that the more economies develop, the less tenable this idea will be. It's going to be a hard habit to unlearn for me.
I tend to think that life for a city dwelling Russian and a working class Brit wasn’t much different in the 1960′s and 1970′s. Car ownership and house purchase were still spreading down the class system in the UK. In rural areas like Mid Wales, there were still villages reliant on the pump for water (I regularly fetched water from the pump for my grandmother) and ash closets. So far as I remember, the sewage pipe came first. But of course, relatively far fewer such places than in Russia.
Also, speaking technically, Russian factories that I visited in the 1990′s and 2000′s seemed stuck in a 1970′s time warp. In many cases, that was when they last received significant investment. The ’70′s was, of course a period of high oil prices. The ’60′s was still post war recovery.
PPP is a hazardous method of comparison. It is very expensive to collect such data. The last time the World Bank did it was 2011. Differential inflation (low mostly but high in Russia) can distort comparisons using current figures rather than the Maddison methods.
Nominal currencies and payments exist. Whereas PPP figures are rough projections based on limited information.
PPP figures are useful, but as 'rough guessworks' rather than anything very precise. It teaches an important lesson that the nominal figures don't explain what you can actually buy - but the projections that the PPP estimates provide are not precise ones.
-----------------------------------------
Incidentally, your line charts are hard to read. You should place the labels on the right next to the lines. Something like this:
https://www.unzcloud.com/wp-content/uploads/2015/04/Screenshot-from-2015-04-05-132753.jpg
No. Finland was behind on industrialization compared to Western Europe but well ahead of the rest of the Russian empire. In 1917 Finland was exporting industrial goods to Russia and importing grain. Data where this is the other way around makes no sense and it’s probably a result of Finland having its own currency and getting PPP adjusted differently from rest of Russia.
But still, there is something very wrong with economic data that is not showing a massive transformation in Finland. In 1850 Finland was 95 % rural with the largest “city” being Helsinki with only 20,000 people. In 1917 Helsinki had grown ten-fold to 200,000 people and the country was dotted with entirely new industrial cities in the 20,000-50,000 range around waterfalls that were turned into power plants.
The Bank of Finland historical data that I googled has Finland as the fastest growing economy in Europe from the 1860s to 1917, starting from the liberalization and market reforms after the Crimean War.
Around the turn of the century, Russians stereotyped Finland as a rather backward place and (ethnic) Finns as backwoods country bumpkins. Apparently, these stereotypes had some basis in reality. Of course, both Russia and Finland were developing at a breakneck speed and then various stuff happened.
But still, there is something very wrong with economic data that is not showing a massive transformation in Finland. In 1850 Finland was 95 % rural with the largest "city" being Helsinki with only 20,000 people. In 1917 Helsinki had grown ten-fold to 200,000 people and the country was dotted with entirely new industrial cities in the 20,000-50,000 range around waterfalls that were turned into power plants.
The Bank of Finland historical data that I googled has Finland as the fastest growing economy in Europe from the 1860s to 1917, starting from the liberalization and market reforms after the Crimean War.
Comparative advantage. Doesn’t make a whole lot of sense to export grain from Finland. Today, USA exports grain and imports manufactured goods but it doesn’t mean that it’s undeveloped.
Around the turn of the century, Russians stereotyped Finland as a rather backward place and (ethnic) Finns as backwoods country bumpkins. Apparently, these stereotypes had some basis in reality. Of course, both Russia and Finland were developing at a breakneck speed and then various stuff happened.
Fact still is, Finland was more industrialized than the Russian empire on average by just about any measure. It produced more industrial goods than the Russian average per capita. It produced more electricity per capita. It was urbanizing faster. A higher level of industrial development was completely expected, of course, given that Finland since Alexander II's favorable policies had the most government support for industrialization, the most freedom to trade with the more developed West and so on.
What we have here is an unusual claim that estimates Finland's GDP as somewhat lower than Russian average, contrary to all other estimates that I've ever seen. The obvious candidate for explanation of this discrepancy is PPP adjustment since Finland had its own currency, a bit of an oddity since Finland wasn't even a country, and Finland was under a completely different financial regime for the last half century of the Russian empire (the policy of the bank of Finland tended to be to match the Finnish mark with German currency standards).
PS. A bit of alt-right trivia - Finland was able to start up its own currency against the expectations of Russian conservatives when Carl von Rothschild made an exception to his boycott of Russia and provided the silver to back the currency. As a loan, of course. The Grand Duchy of Finland always, without exception, objected to anti-Semitic policies of the Russian empire...
Around the turn of the century, Russians stereotyped Finland as a rather backward place and (ethnic) Finns as backwoods country bumpkins. Apparently, these stereotypes had some basis in reality. Of course, both Russia and Finland were developing at a breakneck speed and then various stuff happened.
And in Finnish stereotypes Russians were serfs who couldn’t even read. Stereotypes aren’t much – maybe some aristocrat in Petrograd only met Finns as the farmers who came to sell potatoes at the marketplace but if he would have visited some city in Finland he would have instead stereotyped Finns as the working class toiling in factories owned by Western investors. (This is what those who actually spent time in urban Finland thought – see the works of Lenin, Stalin etc.)
Fact still is, Finland was more industrialized than the Russian empire on average by just about any measure. It produced more industrial goods than the Russian average per capita. It produced more electricity per capita. It was urbanizing faster. A higher level of industrial development was completely expected, of course, given that Finland since Alexander II’s favorable policies had the most government support for industrialization, the most freedom to trade with the more developed West and so on.
What we have here is an unusual claim that estimates Finland’s GDP as somewhat lower than Russian average, contrary to all other estimates that I’ve ever seen. The obvious candidate for explanation of this discrepancy is PPP adjustment since Finland had its own currency, a bit of an oddity since Finland wasn’t even a country, and Finland was under a completely different financial regime for the last half century of the Russian empire (the policy of the bank of Finland tended to be to match the Finnish mark with German currency standards).
PS. A bit of alt-right trivia – Finland was able to start up its own currency against the expectations of Russian conservatives when Carl von Rothschild made an exception to his boycott of Russia and provided the silver to back the currency. As a loan, of course. The Grand Duchy of Finland always, without exception, objected to anti-Semitic policies of the Russian empire…
1. India's historical numbers I notice are just bizarre. $1,400 per capita in the 1920s-30s, but only $1,500 in the 1930s, but declining to close to $1,000 by the 1980s.
I'm aware the economy of the Licence Raj was nothing to write home about... but as far as I'm aware, they did eke out miniscule per capita growth...
2. Turks buy 1 million cars per year as of 2016; that's about as much per capita as Poles, and significantly more than Russia's 1.4 million sales. Chinese buy 28 million (!) per year - almost twice as much per capita as Poles. Though AFAIK in Turkey and to a lesser extent China these are fueled by unsustainable credit booms.
I also recall Chinese reading urban salaries overtaking Russian ones soon after Russia's devaluation; remarkably, Russia is now a cheaper country than China, so Chinese and Russian average consumer power should be comparable by now, I think. This ought to be especially impressive since China continues to maintain very high investment rates.
Even if the Chinese are fiddling the numbers for stability, could the numbers not be broadly accurate anyway?
Russia and China are both autarchies, so comparing them using a dollar denomination is completely meaningless. The exchange rates are set by government fiat, not by market equilibriums.
Ppp numbers are politicized bullshit, which is why I prefer nominal. While that is subject to sometimes large movements in exchange rates, over a longer period of time it is more reliable. It’s only useful when comparing extremely similar economies such as the US and Canada or Sweden vs Norway or UK vs France vs Germany where price levels can and do effect living standards for extremely similar goods otherwise. Using it to compare vastly different countries at different stages of development is a fools errand.
1. India's historical numbers I notice are just bizarre. $1,400 per capita in the 1920s-30s, but only $1,500 in the 1930s, but declining to close to $1,000 by the 1980s.
I'm aware the economy of the Licence Raj was nothing to write home about... but as far as I'm aware, they did eke out miniscule per capita growth...
2. Turks buy 1 million cars per year as of 2016; that's about as much per capita as Poles, and significantly more than Russia's 1.4 million sales. Chinese buy 28 million (!) per year - almost twice as much per capita as Poles. Though AFAIK in Turkey and to a lesser extent China these are fueled by unsustainable credit booms.
I also recall Chinese reading urban salaries overtaking Russian ones soon after Russia's devaluation; remarkably, Russia is now a cheaper country than China, so Chinese and Russian average consumer power should be comparable by now, I think. This ought to be especially impressive since China continues to maintain very high investment rates.
Even if the Chinese are fiddling the numbers for stability, could the numbers not be broadly accurate anyway?
Well…what is broadly anyways, right? For China monitoring I would recommend following Chris Balding as he seems to me he is trying to be fair and address all possibilities.
as for the broad picture a quote from his latest blog:
Chinese assets are wildly overvalued. This stems in my opinion from a money supply that is vastly in excess of the size of the economy. The differences are enormous. In nominal exchange rate terms, the US economy is nearly 50% larger than the Chinese economy. However, Chinese RMB M2 is effectively twice as much as the USD for what is effectively the global currency. When put against the size of the economy, the numbers are even more striking. There is more than twice as much Chinese RMB as there is economy
(http://www.baldingsworld.com/2018/02/20/is-china-deleveraging-revisited/)
also his last article on a big insurer bailout in Bloomberg is rather revealing:
Anbang’s annual life-insurance premium revenue increased from 1 million yuan to 114.2 billion yuan, or total growth of 11 million percent. Even during a period of rapid economic expansion, annualized growth of 593 percent is amazing.
The problem was that the life-insurance products were actually high-yielding debt instruments; investors could opt out of the insurance portion in as little as two years.
(https://www.bloomberg.com/view/articles/2018-02-26/xi-jinping-why-the-u-s-should-fear-china-s-new-emperor)
Capitalism is more efficient only when there is a truly free market and actual competition between a high enough number of players, instead of monopolies and cartels.
It's better at producing a variety of consumer goods but to this day, the Russian state-owned MIC is several times more efficient than the privately owned US MIC.
Many types of companies, especially big natural monopolies and strategic industries should be owned by the state or at least have mixed state and private ownership.
assumptions have to be broad bc. terms such as capitalism and planned economy are rather broad as well. I think it is better to think in degrees of planning or economic freedom if you like. There are several indices for that purpose as you may know, on of which, the World Banks Ease of doing business, had a methodological scandal lately and will revise some countries, namely Chile(https://www.bloomberg.com/news/articles/2018-01-13/chile-demands-answers-in-world-bank-business-ranking-controversy), but one has to wonder about other countries. A friend was very skeptical about Russia ranking rather high on the list for instance.
What is most important imo, is market clearing in a given economy and the scale of the country probably plays an even bigger role. How fast can you set up/liquidate a business, that is mostly how fast do the courts work, how strong are the repo-men and how unregulated the prices are. If you can set up a business easily and enter a field without much regulatory limitations, monopolies don’t really matter. In a big country (even small) however, large firms, or quasi monopolies become almost automatically so called ‘strategic assets’ and are given some degree of protection (that is the remnant war economy mentality) so that given sector of the economy becomes quasi planned.
That said, I personally don’t like comparing USSR to anything, ever, besides considerations for a potential war economy, that is things like steel production, machinery in general, energy resources, human capital etc. Some might say that is all that really matters, but that is a different debate.
As for the MIC, I think it is more complicated. I might be wrong, but my guess is that in the US, the employment in the sector is a more significant part of the economy then in Russia and what’s more, the various productions are setup nationwide and become a significant budget allocation battlefield where there is much bipartisan agreement. The spending so becomes really a gov. subsidized employment program(welfare), such as coal extraction and drives the prices up significantly. Note that in the US, it is not only a problem in the MIC but for instance in infrastructure as well. There was a story in NYT a while back about tunnel drilling for the subway in NYC and the prices paid were 5x!! that of EU avg. if I recall correctly. It come down to a interest group showdown where the construction unions for example, pushed through legislation, such as mandatory allocation of night shifts work hours etc.
70s Soviet Union produced a lot, just it was very poor quality and no one really wanted it. I don’t buy these revisions to Soviet tractor stats, I can believe present day Russia is understated.
Is Maddison the loon who claimed India was the biggest economy in the world in 1500s?
1. India's historical numbers I notice are just bizarre. $1,400 per capita in the 1920s-30s, but only $1,500 in the 1930s, but declining to close to $1,000 by the 1980s.
I'm aware the economy of the Licence Raj was nothing to write home about... but as far as I'm aware, they did eke out miniscule per capita growth...
2. Turks buy 1 million cars per year as of 2016; that's about as much per capita as Poles, and significantly more than Russia's 1.4 million sales. Chinese buy 28 million (!) per year - almost twice as much per capita as Poles. Though AFAIK in Turkey and to a lesser extent China these are fueled by unsustainable credit booms.
I also recall Chinese reading urban salaries overtaking Russian ones soon after Russia's devaluation; remarkably, Russia is now a cheaper country than China, so Chinese and Russian average consumer power should be comparable by now, I think. This ought to be especially impressive since China continues to maintain very high investment rates.
Even if the Chinese are fiddling the numbers for stability, could the numbers not be broadly accurate anyway?
Not only in China, but also the rest of the booming countries in South-East-Asia. e.g.
Vietnam / 93 mio / 2300USD GDPpc -> 270000 cars sold in 2017
Egypt / 96mio / 3600USD GDPpc -> 128000 cars
(Note: Both countries have assembly-factories and most of the cars sold locally are domestically assembled.)
Africa / 2800 billion USD -> 3.4 million motocycles sold in 2017
Vietnam / 215 billion USD -> 3.1 million
Whatever the reported numbers are, due better income distribution in East/South-East-Asia and many CIS states, they are probably much closer to the real ones.
IMHO It’s not only the Turks fixing their numbers, but also the Arabs. If you start looking for poverty-data, you will only find decade-old numbers.
When we look at the African economies it’s even worse. Nigeria became biggest economy in Africa after the president ordered a rebasing and jumped passed Egypt/South-Africa.
It would be great if an economist could somehow mix GDP-numbers with consumption/goods-basket-numbers.
I mean illegal migration, rebel-groups, terrorism and sky-high crime rates don’t just appear out of nowwhere.
For instance, if we take China, they have incorporated Harry X. Wu's excellent 2014 paper on Chinese productivity and GDP statistics.
That was a brave decision. People need to understand the background here. The IMF and the World Bank are mandated by their statutory rules to accept - at face value - whatever the corresponding national statistical agencies tell them. So when growth starts to sharply deviate from observed fast-moving indicators, they are powerless to say no. Maddison Project is under no such compunction, which is why you see these revisions.
The Chinese themselves have started to admit that some of their previous GDP statistics is a dubious quality. The official party line is that this is the work of "rogue provinces", which conveniently washes the hands of the central command. Wu's research is backdated to several decades, the paper itself came out four years ago now. However, even as late as 2015, there were substantial divergences in the economy. And then there is the fact that China's GDP is clinically stable in a way which is simply not plausible for a modern economy.
India is of course another deviant. There is a very recent paper out from National Institute of Public Finance and Policy(NFPIP) which measures business cycles. Not interesting if you're not into economics.
But whatis interesting is that they go over GDP measurement in India and basically trash it completely. Keep in mind, NFPIP is a government-funded institution in India. This is no rogue player. The paper can be read here . The relevant section is at the end. It's not just them, either. India's GDP has almost certainly been inflated by use of faulty GDP deflators.
Turkey is even more shocking, which is why they also got the biggest downgrade in the Maddison Database.
Why do I mention these? We have three cases where Maddison did downgrade compared to official statistics. India saw the smallest hit, probably because their cheating is relatively recent (2015). Turkey's revisions have also been recent but more flagrantly false and also stretching back further in backwards revisions. China did see a hit as well.
All of these three revisions are A) plausible, because a large number of economists in all three countries are skeptical about their own growth figures. Though dissent in China is most fraught with danger whereas it is relatively easier to dissent in Turkey and India, especially the latter. B) They showcase that whatever flaws may be with USSR, it is the outlier and not the norm.
I'll admit I know little of USSR's economic history so I won't rush into something with which I am badly equipped to debate. However, in order not to be completely boring I will venture a guess, it could have something to do with how the price level index is measured, or rather, estimated. Remember that ICP didn't begin their first PPP survey up until the late 70s, and we didn't have a good quality one until the mid-80s. Maddison famously used the 1990s survey as a baseline for his original database because he found too many flaws with the previous rounds. For previous data, you have to make more creative estimates and that is one potential source of error. Again, just a guess. It'd be interesting get to know the perspective of someone well-versed in Soviet economic history who could venture a guess. (Or we could just email the Maddison Project at University of Groningen and ask them head-on).
P.S. I apologise in advance for any spelling errors or poor grammar. I wrote this in one go and it's simply too long to do any editing with my alarmingly low caffeine levels.
Where are you seeing this downgrade?
Compared to the previous Maddison database (the one using 1990 Geary-Khamis international dollars), Turkey has received an upgrade. Where as in the former database, in 2008 (the last available year) Turkish per capita GDP was $8000 and American GDP $31,000 – 25.8% of the American level – in the most recent database, in 2008 Turkey was at 33% of the American level.
The only ‘downgrade’ I can see is for 2016, when Turkish GDP inexplicably takes a 10% dive, despite the fact that there wasn’t any recession in Turkey that year.
The same happens with Romania: the time series was correctly upgraded in the most recent database (vs the ludicrously low level reported in the former database), but inexplicably downgraded in 2016 by 8% – again, despite the absence of any recession.
Lastly, similar to the way the Russian level seems unaccountably inflated in the most recent database, the same thing happened to Serbian GDP: 150% of the total Yugoslav average in the late 80s and 90% of the Croatian level and 325% (!) of the Bosnian level. This seems to me absurdly high. Although Serbia was subjected to international sanctions throughout the entire 1990s, it is still difficult to believe its economy suffered very much more than Croatia’s or Bosnia’s (both of whom were ravaged by war, unlike Serbia itself). Yet by 2005 both Croatia and Bosnia (like Romania and Bulgaria also) had recovered their previous GDP highs, while Serbia even in 2016 still languished far below its supposed level of 1988. Since the Serbian level in 2016 reported in this dabatase is much more in line with PPP estimates made by the World Bank, IMF and CIA for 2016, I think the Serbian time series in the Maddison Project is way off base.
I haven’t seen him explicitly say that anywhere, but there’s nothing ‘loony’ about the notion. India in 1500 had about 100 million people. The biggest country in Europe, France, had about 15 million. So even if India did no more than produce at subsistence level – about $800 per capita in today’s money – it would still have been a bigger economy than France even if France produced five times the subsistence level (which is certainly not what the Maddison Project claims France – or any European country – produced in 1500).
It's an interesting topic. I would answer it by comparing the US and Poland. Poland in 2016 had a (PPP-adjusted in constant currency) per capita income of 26K. In 1990, the US had a per capita income of 37K(!) using the same definition.
In other words, the US in 1990 was a significantly richer country than Poland is today, even using PPP which is flattering for Poland. Using constant-currency nominal GDP per capita makes it brutal.
However, all that being said, despite Poland being substantially poorer today than the US was in 1990, Poland already has higher life expectancy and lower under-5 mortality rates than the US had back then! So we have surpassed their health indicators at a much lower income level. In fact, Poland has lower under-5 mortality today:
https://i.imgur.com/wLpTG0m.png
We're talking about a country half as rich as the US is today. Yet being able to produce a safer environment for its newborn. This is not because "Polan Stronk!", however much my compatriots would like to imagine it.
Rather, I think, it is because we are seeing a slow decoupling from GDP with regards to human progress. Or maybe one could phrase it another way: we're seeing an increased productivity between the relationship of economic growth and human progress. So what required more growth in the past in order to get a certain positive outcome for the general population today requires far less. This would be great news, if true.
And there are reasons to think this hypothesis is true. For instance, a quite poor country like India has a per capita income in the high 5000s according to Maddison database, yet their life expectancy is very close to where the US was in 1960. I'm sure the US wasn't as rich as we imagine it to be in 1960 but I am also sure it certainly wasn't as poor as India is today.
Nor is India a paragon of social efficiency, to put it mildly. It spends a relatively low amount of its GDP on health expenditure, certainly much lower than Vietnam and has very bad malnutrition rates, worse than most Sub-Saharan African countries. Vietnam has a life expectancy of 75.78(!!!) according to the World Bank, despite a per capita income which is almost certainly lower than what the US had in 1968.
So, we're simply seeing increased outcomes of growth, even for laggards like India. I think a lot of analysts who overstate Chinese GDP with various anecdotes like smartphone or internet penetration do this basic miscalculation. We've seen costs fall dramatically for technology in the last few decades and it simply requires lower incomes and lower growth to get the same rates that took much higher incomes in the West in previous era. (Of course, you'd have to substitute smartphones for something similar for previous decades). It's probably the same mechanism at work which is giving developing countries much better health outcomes at much lower incomes.
I wouldn't say that they are richer per se. I would say that they are getting more out of lower growth and lower incomes than did the West in previous eras. Since this pattern is global, it appears to be a generalised trend rather than some genius move by a single set of countries.
Of course there is also the possibility that we are mismeasuring GDP, though one does not have to exclude the other. It's perfectly possible that both happen at the same time. When it comes to mismeasuring GDP, I think professor Diane Coyle's argument is quite compelling.
I suppose a “decoupling” is one way to put it. But basically, GDP has never done at well at capturing quality improvements. For example, the product category “car” in 2016 is obviously vastly superior to the product category “car” in 1916, however it’s difficult to reflect this in GDP data. And the same thing is surely true of “healthcare.”
I’m disappointed that the concept of “GDP” has these problems. It’s very convenient to consult one single number to gauge the degree of economic well-being. Unfortunately, it seems to me that the more economies develop, the less tenable this idea will be. It’s going to be a hard habit to unlearn for me.
1. India's historical numbers I notice are just bizarre. $1,400 per capita in the 1920s-30s, but only $1,500 in the 1930s, but declining to close to $1,000 by the 1980s.
I'm aware the economy of the Licence Raj was nothing to write home about... but as far as I'm aware, they did eke out miniscule per capita growth...
2. Turks buy 1 million cars per year as of 2016; that's about as much per capita as Poles, and significantly more than Russia's 1.4 million sales. Chinese buy 28 million (!) per year - almost twice as much per capita as Poles. Though AFAIK in Turkey and to a lesser extent China these are fueled by unsustainable credit booms.
I also recall Chinese reading urban salaries overtaking Russian ones soon after Russia's devaluation; remarkably, Russia is now a cheaper country than China, so Chinese and Russian average consumer power should be comparable by now, I think. This ought to be especially impressive since China continues to maintain very high investment rates.
Even if the Chinese are fiddling the numbers for stability, could the numbers not be broadly accurate anyway?
I take it you’re looking at the cdgppc series. The rgdpnapc series shows growth occurring.
I’m not gonna claim to understand what the difference between the two is based on the descriptions give: “multiple benchmarks (suitable for cross-country income comparisons)” and “2011 benchmark (suitable for cross-country growth comparisons)”.
The latter series is far more in line with the previous Maddison database I have, as well as with figures produced by The Conference Board’s “Total Economy Database.”
The cdgppc series is massively out of whack with any other data I’ve ever seen, so I just ignore it.
Also, speaking technically, Russian factories that I visited in the 1990's and 2000's seemed stuck in a 1970's time warp. In many cases, that was when they last received significant investment. The '70's was, of course a period of high oil prices. The '60's was still post war recovery.
PPP is a hazardous method of comparison. It is very expensive to collect such data. The last time the World Bank did it was 2011. Differential inflation (low mostly but high in Russia) can distort comparisons using current figures rather than the Maddison methods.
Yes PPP is a very vague figures, which I have noticed seem to get recalculated every several years in a wild way.
Nominal currencies and payments exist. Whereas PPP figures are rough projections based on limited information.
PPP figures are useful, but as ‘rough guessworks’ rather than anything very precise. It teaches an important lesson that the nominal figures don’t explain what you can actually buy – but the projections that the PPP estimates provide are not precise ones.
This part seems superficially plausibl – before the Italian economy hit its ‘second economic miracle’ in the 1980s, and was going through economic crisis in the 1970s epoch.
Note what happened in oil prices in the beginning of the 1970s epoch, which (supernormal oil prices) paid for the more comfortable epoch of ‘developed socialism’ our parents’ generation grew up to.
We can disparage GDP all we want, but surely one of its main benefits is that it provides an objective basis on which to settle disputes about economic issues. I'll take that over too often erroneous subjective assessments any day.
Note what happened in oil prices in the beginning of the 1970s epoch, which (supernormal oil prices) paid for the more comfortable epoch of 'developed socialism' our parents' generation grew up to.
The Italian economy grew significantly faster in the 1970s than in the 1980s.
We can disparage GDP all we want, but surely one of its main benefits is that it provides an objective basis on which to settle disputes about economic issues. I’ll take that over too often erroneous subjective assessments any day.
We can disparage GDP all we want, but surely one of its main benefits is that it provides an objective basis on which to settle disputes about economic issues. I'll take that over too often erroneous subjective assessments any day.
Depends if you are describing 1980-85 (a period of stagnation), or 1985-1990 (a boom years). In 1985, the Italian economy hit its ‘second economic miracle’ and went through very significant growth. The period of rapid growth lasted until 1992.
Anyway, even if other data series say different, I doubt it would justify characterizing the 80s in Italy as a boom period, and the 70s a period of stagnation.
I don’t know what data you’re looking at, but I am looking at the database that is the topic of this thread. 85-92 gives me an average growth rate of about 2.5% per annum; 1970-80 gives me 3% per annum.
Anyway, even if other data series say different, I doubt it would justify characterizing the 80s in Italy as a boom period, and the 70s a period of stagnation.
https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?cid=GPD_30&end=2016&locations=IT&start=1961&view=chart
Maybe it would be better to look at constant prices, but in literature what happens around 1985 is described as hitting the 'Second miracle' economically.
https://books.google.ru/books?id=n5-IAgAAQBAJ&pg=PA85&dq=%22second+economic+miracle%22+italy&hl=ru&sa=X#v=onepage&q=%22second%20economic%20miracle%22%20italy&f=false
Anyway, even if other data series say different, I doubt it would justify characterizing the 80s in Italy as a boom period, and the 70s a period of stagnation.
Looking at the GDP data in current prices:
https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?cid=GPD_30&end=2016&locations=IT&start=1961&view=chart
Maybe it would be better to look at constant prices, but in literature what happens around 1985 is described as hitting the ‘Second miracle’ economically.
https://books.google.ru/books?id=n5-IAgAAQBAJ&pg=PA85&dq=%22second+economic+miracle%22+italy&hl=ru&sa=X#v=onepage&q=%22second%20economic%20miracle%22%20italy&f=false
The link you posted didn't work, but I found some information on it in other books. As I guessed, calling it a "miracle" is mostly based on impressionistic accounts of the period, rather than anything genuinely "miraculous."
Calling it a miracle seems to have a lot in common with popular business books penned by management 'gurus,' who basically come across a company which has recently performed well, discern some management innovations in that company, and then attribute the company's success entirely to those management innovations. Unsurprisingly to anyone with any idea of how the world actually works, the company often fails to maintain its impressive performance, and then the whizz-bang management innovation is promptly consigned to the memory hole (where it can be rediscovered and regurgitated by a later generation of management gurus).
https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?cid=GPD_30&end=2016&locations=IT&start=1961&view=chart
Maybe it would be better to look at constant prices, but in literature what happens around 1985 is described as hitting the 'Second miracle' economically.
https://books.google.ru/books?id=n5-IAgAAQBAJ&pg=PA85&dq=%22second+economic+miracle%22+italy&hl=ru&sa=X#v=onepage&q=%22second%20economic%20miracle%22%20italy&f=false
Well, okay. I don’t want to make too much of this, so my cute reply will paraphrase Marc Antony: “When that the poor hath cried, Caesar hath wept; Economic miracles should be made of sterner stuff: Yet Dmitry says it was an economic miracle, and Dmitry is an honorable man.”
The link you posted didn’t work, but I found some information on it in other books. As I guessed, calling it a “miracle” is mostly based on impressionistic accounts of the period, rather than anything genuinely “miraculous.”
Calling it a miracle seems to have a lot in common with popular business books penned by management ‘gurus,’ who basically come across a company which has recently performed well, discern some management innovations in that company, and then attribute the company’s success entirely to those management innovations. Unsurprisingly to anyone with any idea of how the world actually works, the company often fails to maintain its impressive performance, and then the whizz-bang management innovation is promptly consigned to the memory hole (where it can be rediscovered and regurgitated by a later generation of management gurus).