Mysteries of growth

by on April 11, 2012 at 11:55 am in Economics, History, Uncategorized | Permalink

Matt writes:

To me the most pointed contrast is between the Soviet Bloc and pre-reform China. Why was East Germany so much poorer than West Germany? That’s easy—Communism! And that’s why North Korea is poorer than South Korea. It’s also why Taiwan is richer than China. But Communism hardly explains why the Soviet Union was always much richer than China. But it was a lot richer despite broadly similar political systems and ideological commitments, and the human suffering involved in the PRC’s failure to implement Communism as successfully as the USSR was enormous.

I would say this: Stalin favored industrialization (albeit of a strange sort) more than did the Chinese communists, China had a more damaging heritage of conquest and civil war, Russia was far more urbanized, Russia had greater access to European ideas (some of them bad of course), and the Russian experience of nation-building was mostly behind them, whereas China is still going through this process.  For Russia/Soviet Union, the major structures of 20th century European growth were largely in place, though “liberal institutions” were rejected.  Russia had an advanced European educational system in place, albeit not for everyone.  If you look at the economic history of the more Asiatic “Stans,” which of course were part of the Soviet Union communist experience, the importance of already-industrializing and European connections looks all the more stronger.  The relative prosperity of Estonia also bears out this thesis, though it would be interesting to ponder Kaliningrad/Königsberg in this regard.

Richard April 11, 2012 at 12:13 pm

An obvious threshold question: What was GDP per capita in each country at the time it became communist? In other words, which had a head start? My guess is that the Soviet Union did, by a good margin.

Ryan April 11, 2012 at 12:20 pm

Exactly. China’s communist revolution occurred a few decades later than Russia’s, and the two nations were both in dramatically different situations immediately following WWII.

Daniel Dostal April 11, 2012 at 3:42 pm

China’s communist revolution was communist in name only. Consider it and every non-European communist revolution an agrarian revolution and it all fits much neater. Both China and Russia had disastrous agrarian programs, but Russia focused on many other economic activities while Mao was intent on transforming the Chinese farmer.

Millian April 11, 2012 at 5:44 pm

So, by the usual theories, if China has less GDP, either it should have higher GDP growth or we should be agnostic. Yet China’s GDP growth was much lower, persistently, until market reforms.

Tim Worstall April 12, 2012 at 7:18 am

From Angus Maddison’s numbers.

GDP per capita for Russian Federation (ie, not including the ‘Stans) in 1913, 1928 and 1949 were $1,500, $1,400 and $2,600.

Same years for China, $550, 560 and 448.

So, pre WWI, post WWI and Civil War and post WWII (and China mbcame communist in 1949) Russia was always well ahead.

Nondo April 11, 2012 at 12:37 pm

Cuba is not richer than any of the other Caribean countries; yet, 99% of the poorer cubans live in better conditions than 99% of the poorest living souls in other Caribean capitalist countries. No, sir, communism doesn’t explain that either.

Clueless About Cuba April 11, 2012 at 12:56 pm

yes, capitalism explains that. Their relatives in Miami send them money

Clueless About Cuba April 11, 2012 at 12:57 pm

Capitalism explains it. Their relatives in Miami send them money

Chris Durnell April 11, 2012 at 1:15 pm

Cuba used to be the second richest country in Latin America, and was the third in per-capita terms behind only Argentina and oil rich Venezuela. 1/3 of the country was considered middle class. It had the highest life expectancy in Latin America. It had the fourth highest literacy rate and a large number of newspapers and magazines. It was in the top two in Latin America for the number per capita of telephones, televisions, and automobiles. There were certainly problems and a large number of poor peasants, but very manageable ones. Without Castro, if Cuba had resumed its social-democratic government with expected free market reforms later in the ’80s and ’90s, it’d probably be a developed country today.

Castro destroyed almost all of that. He did invest heavily in basic healthcare, but given Cuba’s already high levels, it’s not like Cuba wouldn’t have continue to improve if Castro never took over. Most of that was due to substantial subsidies sent by the Soviet Union, and when those ended quality of life in Cuba declined substantially. Orindary Cubans may have access to doctors, but they can’t find aspirin in the pharmacies and Cuba lacks adequate supplies of many of the most basic medical staples. Instead, Cuba went from being one of the richest countries in Latin America to the poorest.

Andrew MacDonald April 11, 2012 at 1:50 pm

Those are some mighty big ifs. Given the history of democratic consolidation in the Caribbean, it turns out there is substantial economic value to stable governance of any kind (minus the kleptocrat scenario). Institutional stability is the bugaboo of developing countries and the main reason that Central/Latin America saw major drops in per capita incomes in the 1970s and 1980s. What makes you think Cuba would have avoided that trap absent Castro?

Steven Kopits April 11, 2012 at 4:15 pm

There was an excellent survey of Cuba in The Economist a couple of weeks ago:

http://www.economist.com/node/21550418

Randy McDonald April 11, 2012 at 9:11 pm

“Without Castro, if Cuba had resumed its social-democratic government with expected free market reforms later in the ’80s and ’90s, it’d probably be a developed country today.”

I wouldn’t go that far. Would Cuba have managed to succeed where Argentina, Uruguay, and Venezuela failed? Arguably Cuban institutions were weaker than the Argentine. But, yes, a Castro-less Cuba would be a richer one, just not that rich.

Euripides April 11, 2012 at 3:05 pm

then we should observe many of the “99% of the poorest living souls in other Caribean capitalist countries” trying to get into Cuba to be “better off.” Yet we do not observe that.

Floccina April 11, 2012 at 4:03 pm

I would think that the even the poor would be better off in Barbados than in Cuba.

dan1111 April 12, 2012 at 2:23 am

What is your evidence for this? Perhaps most Cubans are better of than most Haitians, but it is no surprise that communist government could outperform non-functioning government. Of what other country can this truly be said?

Marian Kechlibar April 13, 2012 at 5:41 am

Sir, as a “survivor of late communism” (1980s Czechoslovakia), I respectfully think that you swallowed Cuban propaganda with line, hook and sinker.

Commies anywhere are *extremely good* in propaganda, as it was the only real means of keeping the enslaved masses from revolting, while wooing some of the Western idealists, who wouldn’t care about traveling to the Communist countries to see reality themselves.

For a gullible Westerner, the contrast between polished Commie propaganda and the dreadful (crime, drugs) news channels of the West is overwhelming.

I would caution you, though, that by far the best (most colourful etc.) propaganda is churned out by North Korea, which at the same time cannot hide its large starvation problem.

Michael April 11, 2012 at 12:52 pm

Tyler, for a person that purports yourself as an intellectual, do you even know what communism means? My feeling is that you confuse it with a centrally planned military dictatorship (I doubt you would define a democracy by The Democratic Republic of Congo).

Bernard Guerrero April 11, 2012 at 1:16 pm

Good Lord, is this one of those “we don’t know if it works because it’s never been tried” ripostes? Newsflash: It ALWAYS ends up as a centrally planned military dictatorship. That’s not accidental. (It may even, depending on where you sit in the polity in question, be a feature rather than a bug.)

Michael April 11, 2012 at 1:52 pm

Interesting thought! So you’re saying that in the same way capital holders favors a rentier/capitalistic system, the military favors a “military dictatorship”-system. Consequently, we’ve naturally seen countries with a strong military move towards communism and countries with a strong rentier-class move towards capitalism. I think your theory actually fits the data pretty well.

FYI. For the consistency of your arguments: for it to always end up as a centrally planned military dictatorship, it must have been tested. Hence, the only argument you’d need, to refute my statement, is that it has actually been tested. But then again, I don’t think you understand what communism is.

Sum Yung Gai April 11, 2012 at 2:15 pm

I’ll bite: what do you think it means?

Michael April 11, 2012 at 3:04 pm

Haha, the classic “let-him-answer-his-own-question”-trick, ey! I’ll bite back! Communism is essentially shared ownership of the means of production as opposed to private ownership of earth’s finite resources under a capitalistic system. I even think communism explicitly favors a government-less society. However, this is irrelevant as communism as capitalism is more of a theoretical ideal than it is a system in practice. What can be said with certainty though, is that whatever philosophical leaning we choose, its success is dependent on good institutions.

Doc Merlin April 11, 2012 at 4:22 pm

What does “shared ownership” mean?

It sounds like you want to introduce principal-agent problems where there doesn’t have to be any.

MD April 11, 2012 at 7:36 pm

“Shared ownership” is like parts of a condominium which are owned by the association, as opposed to apartments owned by individual unit owners. It barely works for condos. (If you have ever been part of a intra-condominium association dispute, you’ll know what I mean.) I can’t imagine any attempt to own all the means of production, whether in one country or around the world, ending in anything but failure and misery. Any theory that requires people to stop acting like people is doomed to fail.

Steven Kopits April 11, 2012 at 4:40 pm

That’s “state-ownership”, not “shared-ownership”. Try going to your local library and saying, “Gee, I share ownership of this, so I’ll spend the night here.” It doesn’t work in communist societies either.

In theory, with communism you get government-less society. In practice, you get dictatorship of the proletariat, more precisely dictatorship of one proletariat.

Egalitarianism cannot co-exist with property rights. If you are allowed title to your property, then people will not be equal by definition. But without property rights, you can’t accumulate wealth, and there will be little investment. And, of course, there is limited incentive to work. And then people will want to leave. And then you have to close the borders. And then they complain, and you have to end freedom of the press. So egalitarianism is inevitably about coercion (or haven’t you been following the Supreme Court cases lately).

Communist dictatorships are not like military dictatorships. Military dictatorships are parasitic; they want to skim off the population, but they don’t really care what the population does. Commerce is not prohibited, just channeled to favored parties. By contrast, communist dictatorships inhibit commerce (eg, selling of labor) and the accumulation of wealth (investment). It really is about ideology.

I would guess that the difference between Russia and China was as a result of initial endowments of physical and human capital. Hungary was a bit behind the Czech Republic before communist times, during and still is.

On the other hand, if you don’t invest for decades, the capital stock (both physcial and human) erodes, and a country becomes poor. That’s very much what happened to Cuba. See The Economist article: http://www.economist.com/node/21550418

On the other hand, when communism falls, you need to align the incentives of the politicians if you don’t want eroded human capital running the place. That’s a lesson from Hungary, as are most of the comments I make related to governance and ideology.

MC April 11, 2012 at 6:09 pm

“Haha, the classic “let-him-answer-his-own-question”-trick, ey!”

LOL, forcing you to explain your ideas is only a successful “trick” if you adhere to asinine ideas like Communism.

Barkley Rosser April 11, 2012 at 2:19 pm

Michael,

I have little doubt that Tyler knows more about communism than you do, a lot more in fact.

Michael April 11, 2012 at 3:10 pm

Barkley, you are probably right. However, Tyler is being disingenuous using the communist states (not a self imposed term as much as a term imposed by the “western world”) when analyzing moral, political and economical philosophies. I think we would get much further intellectually if we had an honest discussion about these topics.

And as for this post, I don’t think anyone doubts the inferiority of a centrally planned military dictatorship.

Taeyoung April 11, 2012 at 3:40 pm

not a self imposed term as much as a term imposed by the “western world”

I . . . what the hell are you talking about? It’s what they call themselves! 共產 . . . 共產黨 . . . Not hard to make the connection. I guess in DPRK, 로동당 isn’t quite as blatantly Communist right there in the name itself, but it’s not like they pretend they’re something else, just a further refinement of Marxist thought.

Michael April 11, 2012 at 3:52 pm

That’s beyond the point. When they explicitly call themselves a democratic republic, I think we can conclude that whatever they call themselves is not necessarily what they are. I’m more interested in your thoughts of how they’ve refined Marx’s thoughts.

Ricardo April 11, 2012 at 10:12 pm

Michael, I cannot speak to Maoism but the relationship between Marxism and Leninism is pretty well-established. I suppose you could do worse than, say, skimming the Wikipedia article on “Leninism” and then reading the underlying sources provided in the bibliography, including Lenin’s own writings where he discusses the role of Marxist thought in his governing and revolutionary philosophy.

Otherwise, you are simply making a semantic point. “Communism” can refer to the theoretical last stage in Marxist thought where the state withers away. But “Communist” can be used as an adjective to describe an organization (such as the Bolsheviks) that clearly saw itself as playing an assigned historical role in bringing about an eventual transition to Communism and is, in practice, used to describe states ruled by such organizations.

Michael April 11, 2012 at 11:27 pm

Ricardo, yes I am just making a semantic point. I think it’s very disingenuous using examples of “communist states” refuting communism. Whether or not Leninists/Maoists called themselves communists and honestly tried to the best of their abilities to live up to Marx’s ideas, has nothing to do with the relevance of Marx’s moral thoughts. Smart people like Tyler fully understands that ideas should only be refuted based on their own merits. Judging based on implementation attempts is intellectually dishonest, especially knowing communism is not a blueprint for implementation, it’s rather a critic of Capitalism more than anything else. Communism should be attacked for what it is.

It’s clear from reading all the comments, that the blinders put on during the cold war it still on. Maybe I’m just being naive, and we’ll never get beyond the Domino Theory justifying millions of innocent Vietnamese deaths, making sure the bourgeoisie never will get their property rights and their entitlement to rent questioned.

dan1111 April 12, 2012 at 2:53 am

Judging ideas on the merits involves looking at the evidence of how they work. An estimated 100,000,000 people died at the hands of governments that were attempting to implement Communist principles. It matters not whether they achieved some ideal level of adherence to Marxist theory. The innocent dead have killed your argument. Period.

There is a reason that communist governments always end up being totalitarian. Communism is a naive ideology that goes against human nature. No one behaves in the way that Communist thought requires unless they are forced to do so. Capitalism, by contrast, is not some sort of unattainable platonic ideal. It is what naturally arises when people are allowed to be free. In fact, every Communist (or attempting-to-be-Communist) country has had a capitalist system called the black market arise to meet needs that the ideology could not.

As for Vietnam, exactly who do you think was the aggressor in that war? We were helping defend some of the Vietnamese people who did not want a Communist government imposed upon them. When the communists did take over, the result was thousands of executions and, later on, severe famine. Only when Vietnam, like China, began to allow some capitalist enterprise did the welfare of the people begin to improve.

Even Marx gave up on this stuff before the end of his life. It is well past time for you to do so.

Daniel Dostal April 11, 2012 at 4:07 pm

I was in nearly perfect agreement with you in the thread until this. All of the communist revolutions post Soviet Russia were communist because either a leading thinker was a Marxist or the leaders took the USSR’s side on the world stage.

Floccina April 11, 2012 at 4:10 pm

Michael, would you agree that there would be incentive and information problems even a democratic communist state?

Michael April 11, 2012 at 4:29 pm

Of course, there are always incentive and information problems. I don’t really know how to answer your question, as I can’t envision a pure communist state in practice. What does “shared ownership of the means of production in a stateless society” even mean? I don’t think anyone has a good answer for communism in practice. That being said, ignoring communist ideas deprives us of valuable knowledge in the pursuit of creating a free and fair society.

TallDave April 11, 2012 at 5:21 pm

I’m not sure it’s fair to say communism fails, as it does an excellent job of both fostering widespread economic equality and empowering the political elite, which are its actual aims. Whether millions of people tend to starve to death under Communist regimes is not really germane.

So, I must agree ignoring communist ideas deprives us of valuable knowledge in the pursuit of creating a free and fair society, in much the same way as ignoring the ideas of slave states and racially-based caste systems does.

kiwi dave April 11, 2012 at 12:55 pm

Richard, Ryan: agree. If you read Greg Clark’s wonderful work “Farewell to Alms”, he notes that even prior to the Industrial Revolution and the breakout from the Malthusian trap, East Asians (in particular, people in China and Japan) had lower per capita incomes than Europeans despite (and in fact, in part due to) the fact that Asian societies were more sophisticated and advanced than European ones. The location of the Industrial Revolution in Britan and then Europe obviously magnified these disparate starting points. Remember that by 1917 Russia had been industrialising at breakneck speed for decades already, while China was still hopelessly behind.

Stalin favored industrialization (albeit of a strange sort) more than did the Chinese communists

I’m not sure about that — ever heard of Mao’s “village foundries” program? The Chinese Communists were hugely into industrialisation, albeit of a bizarre and disastrous rural-focused, top-down kind.

I think one key difference was the treatment of intellectuals: while the USSR was of course hugely repressive and enforced crazy orthodoxies on scientists (e.g. Lysenkoism), on the other hand it co-opted the intelligentsia and tried to foster it for its own purposes, giving the USSR access to masses of highly skilled engineers and scientists. By contrast, China had the Cultural Revolution, when thugs went around beating up literate people and smashing their eyeglasses. The latter is not a good way to develop your economy.

Millian April 11, 2012 at 6:00 pm

Does the Cultural Revolution explain the divergence in Soviet/Chinese GDP between 1922 and 1965? It does not. I wager that growth performance was better in the 30 years following the Cultural Revolution than before it.

agorabum April 11, 2012 at 8:07 pm

That is much better explained by war. Even though the USSR suffered greatly during the war, it was able to enjoy a basic stability and industrialization from 1922-1940 (aside from self-inflicted wounds like the Ukrainian famine and the purges), and was also able to take whatever it wanted from a defeated eastern europe to help rebuild.
China had civil war and warlordism from 1922-1946, as well as invasion by Japan from 1930-1945. So there wasn’t even a unified polity to begin to focus on rebuilding until 1946/47, when China jumped right into the Korean War.
In light of all that, Russia’s participation in WWI and the subsequent revolution and counter-revolution was highly damaging, but far less so than the anarchy of pre-1946 China.

JL April 11, 2012 at 1:00 pm

Russia has a lot more natural resources than China.

kiwi dave April 11, 2012 at 1:04 pm

Yes, oil and diamonds kept the USSR afloat longer than it would have otherwise.

That and Stakhanovite heroes of labour creating a new socialist society!

anon April 11, 2012 at 1:16 pm
Ted Craig April 11, 2012 at 1:17 pm

Estonia should be closer to its Scandinavian neighbors at this point in its history, another argument against Communism.

Cindy April 11, 2012 at 1:19 pm

Russian industrialization started in late 1800s and was completed by 1930s. China remained an agricultural country until 1990s. Plus, the Russian labor force was much better educated.

Leonardo T. B. April 11, 2012 at 1:42 pm

In the 90s China enforced a centrally planned industrialization program, feeding off previous reform’s achievements . The pace of industrialization started a decade earlier.

efp April 11, 2012 at 3:09 pm

Yeah, the obvious difference is very different starting points. About the same difference, I’d guess, as pre-communist Russia and China.

Michael Heller April 11, 2012 at 1:36 pm

A good person to talk to about the Kaliningrad/Königsberg comparison would be Immanuel Kant. It’s his patch. I will ask him when I next see him.

http://www.project-syndicate.org/blog/kant-goes-to-berlin

Peter April 11, 2012 at 1:42 pm

I’ve been to the Kaliningrad region, and as such found the last question pretty interesting. I have no numbers or even anything in particular to say about it, other than it’s worth mentioning that a pretty large population of that area was deported there, and at least in the city itself, nearly all of the German institutions were completely destroyed in the war (the zoo, as a rather obscure example, was apparently very impressive before the war, but by the end had only 4 surviving animals). More than that, when there the Russians we spent time with told us that the Soviets tore down most of the buildings that survived and used the bricks to build new “soviet” buildings so as to leave almost no trace of what had been there.

Also interesting was that many people I had met had visited Germany, but almost none had visited Poland, despite its proximity. This would largely be attributed to the influence of the Lutheran church.

Barkley Rosser April 11, 2012 at 2:47 pm

Peter,

Reinhard Selten was born there and told me that when he returned for a visit a few years ago, many of the buildings he remembered were still there, although the house he was born in was not.

The most important and dominating feature of current Kaliningrad is that it hosts a huge Russian naval base, without doubt the main reason the Russians hang onto it, despite its isolation from the rest of Russia. This also makes it very different from any of the Baltic states.

Vanya April 12, 2012 at 8:56 am

But Russians aren’t Lutherans. I would attribute your observation simply to the fact that Russians generally admire Germany and don’t like, or have condescending opinions toward, Poland. Poles probably are far less welcoming than Germans to Russian visitors.

eric April 11, 2012 at 1:55 pm

Speaking of the Asiatic “Stans”, I’m taking a trip to Tajikistan and Uzbekistan later this year. If any MR readers have any recommendations as far as what to eat, what to read, and what to visit, I’d love to hear them.

mulp April 11, 2012 at 2:29 pm

What was the difference between authoritarian Russia/Soviet central planning and the “South” Korean and Taiwan authoritarian central planning?

I wonder if remembering the economic debates and developments of the 60s, 70s, 80s isn’t a curse and a handicap.

I remember when the industrial policies of ROK and Taiwan were criticized on the same terms as those of Moscow:

The state investment in steel making is a doomed waste of money because the free capitalists will always be more efficient.

The state investment in ship building is a doomed waste of money….

Which then switched to well, why should the US prop up old industries when Russia, Korea, Taiwan will subsidize steel and shipbuilding.

But now we have people arguing the US national security is at risk if the US closes US shipbuilding ports serving the military which are required to source the steel from US steel makers.

Why should the US rely on the Asian ship builders for warships? Why should the fact the outsource to China be a problem? Shouldn’t we be happy China is building air craft carriers as part of its authoritarian central planning subsidized industrial policy because the US will save money buy buying military equipment from China.

And today, we partner with Russia, or rather we are a customer of Russia to go to the space station. Yet Romney is calling for a government central planned industrial policy to get to space because Russia is still the worst enemy we face. Unless it is China which is developing the ability to build ships when the US has lost almost all ability to build ships.

Hong Kong even when Uncle Milt was praising it was a central planned authoritarian territory – it was a British controlled trading port to China without any individual liberty to determine the course of the territory because that would obstruct British central planning policy.

Daniel Dostal April 11, 2012 at 4:21 pm

Top-down Capitalism can work, especially if planners allow the bottom to take on more responsibilities as time passes. Top-down Communism destroys the necessary involvement of the bottom, and I’m not convinced it could be built back up from edicts on high. This is part and parcel why I agree that communism isn’t workable.

TallDave April 11, 2012 at 2:49 pm

Excellent points.

The Chinese experience is exemplified by an edict for Chinese peasants to forge steel at home. Naturally, 99% of it turned out to be nearly useless. The Man of Steel was not quite so blinkered.

Tangurena April 11, 2012 at 3:08 pm

The Soviet Union ended up wealthier because they were able to extract wealth from the other Warsaw Pact nations. A portion of products made in countries, such as Poland, would be shipped to the Soviet Union at nominal costs while officially they were exchanged for Soviet goods – this amplified the shortages in the warsaw pact nations. It wasn’t as mercantilist as the British empire (as for controlling colonies), but was about as much as one could achieve in the 20th Century and within Marxist ideology.

China lacked “colonies” they could plunder. Although they seem to have adapted to globalization and grown amazingly well with it (for some members of their nation).

Daniel Dostal April 11, 2012 at 4:31 pm

China is the original mercantilist culture with several conquer, exploit, assimilate cycles of the non-Han areas. 20th century China didn’t have any more easy conquests just reasserting power in Tibet and Xinjiang.

genauer April 11, 2012 at 3:09 pm

I think,

West / East Germany catchup is one of the most fascinating things to study,
a) because the “East” was at least at par before 1945, and
b) the immediate and compete 1:1 adoption of western institutions makes the economic catchup a pretty pure play on economics.
This is good for hundreds of actually (potential) interesting thesis and paper work.

Dennis April 11, 2012 at 8:28 pm

Was it? The provinces that became East Germany represent what, 1/4th of the entire Federal Republic? And while the West got industrious Bavarians and Rhinelanders the East got militant Prussians.

Randy McDonald April 11, 2012 at 11:57 pm

Before the Second World War, Bavaria was one of the less industrialized and developed states of Germany, while Prussia–the whole northern half, including most of what was the GDR–and all of Saxony led the country.

Vanya April 12, 2012 at 8:31 am

True. Traditionally Saxony was always one of the richest of the German states. Dresden and Leipzig were both industrial and cultural leaders for most of modern German history. There are probably a few explanations for the disparity. 1) The Soviets stripped the GDR of almost all its productive assets (literally, they even ripped up railroad track and took it to the USSR) at the same time the US was pouring aid into the West. 2) There was definitely a brain drain from East to West from 1945 to 1960, moreover most of the more productive refugees from German Silesia and East Prussia went West. 3) The traditional hinterland of Saxony partly disappeared. German Silesia and Austrian Bohemia had both been very prosperous regions that went into steep decline under Communist rule and the massive dislocations due to population transfers post 1945. By contrast Western Germany got France, England and Italy as trade partners.

Euripides April 11, 2012 at 3:11 pm

Russia proximity to Western Europe and relative openness prior to 1917 had allowed an easier technology transfer.
Also, Russia did not help out China much as there were disagreements between the two–I am fuzzy on the history of this.

KLO April 11, 2012 at 3:13 pm

The USSR attempted to compete with the West in certain areas, particularly in military hardware and vanity space projects. To the extent that the USSR was successful, much of the success is owed to the incentives created by this competition. Talented people who would have otherwise been killed or set aside by most dictatorial regimes were allowed to contribute, and some of their eccentricities were ignored. Every other part of the Soviet economy that was not in or perceived to be in competition with the West floundered badly. The key is not so much capitalism, but competition. Of course, it is hard to foster the same level of competition in so many diverse areas of the economy without free markets. But where you have genuine competition, human beings will create and innovate.

Steve Sailer April 11, 2012 at 3:49 pm

China was poorer per capita for a long time before Communism because rapid population growth would drive it up close to its Malthusian limits. Under periods of disorder, the population would crash.

Is it really that heretical in contemporary economics to even mention the obvious advantages of having a lot of arable land per person?

M April 12, 2012 at 4:04 am

Not sure if population growth was ever especially fast (population increasing to use up all available resources at a Malthusian limit) or slow (population at the Malthusian limit and unable to expand) in China.

European and Asian population growth trends seem basically identical between 1500-1800 in wikipedia’s (dubious?) World Population historical data (it’s the best I could find quickly), and I assume that the lion’s share of that is India and China – http://en.wikipedia.org/wiki/World_population. And the European rates increase, not decline, between 1800-1990.

Asia’s pre-1900 absolute population levels don’t even seem particularly high compared to Europe, given the land mass of the major East Asian countries. Asia consistently collectively has about 3 times the population, collectively between China, India and the peripherals before 1800 and this sort of even stays constant to 1950. That’s high, but they have a lot of arable land in China+Japan+India+Bangladesh+South East Asia+all the other small countries. Asian farming of course is generally more human labor intensive and animal labor intensive and less extensive than European farming.

Really, it’s the crazy population increase by 150% in Asia between 1950 and 2000, in our times, without a corresponding increase in Europe that sets them Asia and Europe apart, while otherwise Asian and European population dynamics seem to have roughly identical growth trajectories. We shouldn’t project this backwards.

Floccina April 11, 2012 at 3:57 pm

Russia (and BTW Cuba) was not that far back before the communist took over. Look at what came out of Russia before the revolution things like the periodic chart and Tchaikovsky.

D April 11, 2012 at 4:16 pm

Yes, but Russian jazz will never compare to Afro Cuban. ;)

Daniel Dostal April 11, 2012 at 4:35 pm

Russian achievements were concentrated in small pockets of the nation. In absolute terms, Russian culture was visible to Western Europeans, but in some sort of culture/capita rating Russia was vastly outmatched.

Timofey April 11, 2012 at 6:06 pm

Russian Empire educated almost as many engineers/capita as Great Britain.
Around 90% of the youth had an elementary school education in 1917.
1:1 death rate of soldiers in battles between Russia and Germany in WW1 also shows the cultural and moral level of the army back then (especially compared to WW2).

Vanya April 12, 2012 at 8:46 am

1:1 can’t be right. Tannenberg alone should skew the numbers heavily in the German favor. Are you including the Austrohungarians on the “German” side?

Timofey April 12, 2012 at 12:50 pm

Yes, I meant central powers. Austria-Hungary was a bit less developed than Germany…
No matter how you count, the difference in casualties is not very large. Considering the size of Russian army, the power is astonishing.

TallDave April 11, 2012 at 5:25 pm

Yes, I often wonder what Russia and China might have gifted the world if not for their lost half-century.

Doc Merlin April 13, 2012 at 2:53 pm

China’s loss was much worse and longer than a mere half-century. At one time it was, by far, the richest and most advanced nation on the planet.

TallDave April 13, 2012 at 6:19 pm

Well, consider if the Nationalists had won — look at Taiwan (or Hong Kong or South Korea) today, and now imagine mainland China is doing as well. So much lost!

True, China’s relative decline began long before. OTOH I was considerably less impressed by the “richest and most advanced” of the olden days after I realized all those pre-1800s great powers were actually much poorer and primitive than any number of Western countries circa 1900, which themselves in turn are roughly equivalent to some Third World countries today.

Randy McDonald April 11, 2012 at 9:15 pm

I’m not sure how relevant Kaliningrad is to comparative economic historians, whether compared to the Germanies or to the Baltic States or whatever countries. The pre-1945 population of what had been the northern half of East Prussia was completely replaced by the end of the 1940s. The effects of this population shift far, far outweigh any differences between West and East German economic policies or East German and Soviet variants of Marxism.

Tony April 11, 2012 at 11:44 pm

I am not sure the USSR and China had “broadly similar political systems”. In practice there was no one single ‘communist’ economy just as ‘capitalist’ Sweden, USA and Singapore are different. (Read economists like Janos Kornai to understand). It is very much a North American view that there was ever some Manichean split between economic systems…

Steve Sailer April 12, 2012 at 2:38 am

Russia, since the time of Peter the Great, was a marginally Western country. China was an overcrowded Eastern country, that, when it finally tried to Westernize in the 20th Century, picked a lot of bad Western role models and had a lot of bad leadership until old man Deng finally clawed his way to the top.

M April 12, 2012 at 3:45 am

Russia had greater access to European ideas (some of them bad of course)

Russia did not just have access to European ideas and technology though Tyler.

Russia produced ideas and technology (albeit not at American standards or even Northwestern European standards). And this goes back to before the Communist project.

We can’t say this of China.

This likely made a difference.

Timofey April 12, 2012 at 7:48 am

Just to look at how much the writings of Gogol, Dostoevsky, Tolstoy, Nabokov and Chekhov contributed to the Western culture. Music of Tchaikovsky, Stravinsky, Shostakovich, Prokofiev, Mussorgsky…
Surely, many of them adopted the Western European style/ideas and expanded the scope of their use. But this is mostly true with artists.
Russian literature is unprecedented.

Vanya April 12, 2012 at 8:41 am

” China had a more damaging heritage of conquest and civil war, Russia was far more urbanized”

I’d be careful with this. The Russian civil war was far more devastating than most people realize, since the Communists weren’t eager to advertise that side of it. WWII was a very heavy blow to Russia. At least the Japanese built some infrastructure in Manchuria, the Germans just left devastation. Of course the Russians were able to acquire massive “reparations”, human talent and even infrastructure from the their Eastern satellites after the war, China had to rely on its own resources.

I would also question whether Russia was more urbanized than China in a meaningful sense. Remember in 1917 most of the true industrialized urban areas (Warsaw, Helsinki, Vilnius, Lodz) left the empire. Unlike Western Europe or China, Russia has no real tradition of market towns driving economic growth. Most towns in Russia proper before the 1860s were just administrative centers and military garrisons in the midst of a sea of peasant villages. Russian urbanization was in many ways well behind China if you are comparing Russia in 1917 to China in 1949.

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