|Editor(s):||Rao, D.S. Prasada |
van Ark, Bart
|Reviewer(s):||Prados de la Escosura, Leandro |
Published by EH.Net (January 2014)
D.S. Prasada Rao and Bart van Ark, editors, World Economic Performance: Past, Present and Future. Cheltenham, UK: Edward Elgar, 2013. ix + 432 pp. $160 (hardcover), ISBN: 978-1-84844-848-3.
Reviewed for EH.Net by Leandro Prados de la Escosura, Department of Social Sciences, Universidad Carlos III.
This volume commemorates the late Angus Maddison’s distinguished academic life and provides an idea of his wide range of intellectual interests and drive. As time goes by it becomes evident how Maddison’s approach changed the way economic historians address long-run growth. As late as the early 1980s, the study of industrialization (economic growth was not a fashionable term yet) mainly focused on sector analysis in which agricultural transformation played a major role while services were largely neglected. Maddison’s Phases of Capitalist Development (1982) led economic historians to investigate past experiences of growth with the tools used to analyze contemporary societies. As this approach required macroeconomic data, Maddison persuaded colleagues across the world to undertake the construction of historical national accounts. At the same time, in Groningen, he led a team researching international GDP comparisons. On this basis Maddison produced his widely used historical statistics of purchasing-power-adjusted GDP per head and stimulated scholars to pursue similar avenues of research as evidenced by the Maddison Project.
In World Economic Performance a group of Maddison’s friends and students contribute ten papers initially presented at conferences held to celebrate his eightieth birthday. An unpublished piece by Maddison himself on Chinese long-run performance, a two-part intellectual autobiography, an obituary, and an introduction complete this lengthy volume.
In a Maddisonian fashion, the volume encompasses the experiences of developed and developing countries. Thus, the BRIICs, that is, Brazil (as a part of Latin America), Russia, India, Indonesia, and China, along with OECD countries – the U.S., Western Europe, and Japan – are examined. Maddison’s augmented production function including proximate and ultimate causes of growth presides over the volume’s contributions that, nonetheless, focus on the post-1950 era and include a prognosis of their performance up to 2030.
In the case of the BRIICs, two phases are distinguished in their performance since 1950: an initial phase of government intervention and regulation with sluggish growth, and a later phase of liberalization and accelerated growth. Growth accounting shows that while factor accumulation prevailed in dirigiste and socialist experiments, capital deepening and efficiency improvements drove growth thereafter. Maddison and Justin Yifu Lin address poor performance and falling behind under Maoism in China (1948-1978) and accelerated growth after economic reforms were introduced. Lin associates China’s success in its on-going transition to a market economy to gradual reforms, in contrast with Russia’s “big bang” of privatization. He does not envisage, however, whether such a transition would have been feasible in a more democratic context, as it was the case of Gaidar’s Russia. In Maddison’s account, a much lower level of development, openness for international trade and capital, and the survival of the socialist state largely explain China’s success. Stanislav Menshikov adds an important dimension, the transformation of Russia from a heavy industry economy into a petrochemicals and metals exporter with dramatic consequences on income distribution. Deepak Lal’s contribution on India completes the picture with an assessment of Fabian socialist policies that led to an inward-looking industrialization strategy and of the gradual transition to market-friendly policies initiated in the 1990s in which agriculture and, especially, services made a significant contribution – while opening up is still incomplete. These four chapters provide a fascinating reflection on the implications of inward-looking policies for long run development and serve as a cautionary tale for those nostalgic for industrial policies and “state-led industrialization.”
As regards the developed world, the role of ICT in broad capital accumulation and multifactor productivity (MFP) is singled out as the crucial differential in long-run performance between the U.S. (Robert Gordon) and Western Europe (van Ark, Mary O’Mahony, and Marcel Timmer), that becomes especially germane in the case of services. Kyoji Fukao and Osamu Saito stress how exhausting catching up and declining working-age population signaled the end of Japan’s accelerated growth.
What will the future bring to emergent economies? Simple arithmetic projections based on factor endowments (human and physical capital per worker) and the technological gap suggest that differences in per capita income with the West will be reduced by 2030. However, the exhaustion of catching-up as a potential factor of deceleration in the BRIICs is only superficially addressed. The Japanese experience provides a warning to forecasters. A glance to the convergence literature of the 1980s shows how misguided the predictions of Japan’s catching up to the U.S. were. Institutional obstacles that condition incentives to innovation are also largely neglected. How will China’s performance be affected by hard-to-avoid political reforms? Surprisingly, little attention is paid to geopolitical and strategic issues that may hamper the optimistic picture drawn by most contributors, with Ross Garnaut’s exception. The fact that economists have been unable to predict major developments over the last century challenges any prediction made on the basis of simple forward projections. China’s rivalry with India or Japan, the race to control natural resources – as opposed to its provision through international trade – and the consequences of global warming are threats to the linear progression of events that should be taken into account.
Gloomy predictions are made, in turn, for Western Europe and Japan. Improving efficiency in services appears to be a crucial but far from easy prerequisite for resuming fast growth and catching up to the U.S., since the small size of manufacturing precludes a significant catching up from increasing its MFP.
Although we should be grateful to the editors for gathering such a distinguish group of scholars, I would have liked them to go the extra mile and persuade contributors to homogenize their approach to growth accounting. Pierre van der Eng points out how crucial it is to have rigorous and homogeneous measures of factor inputs to derive comparable results. The reader would have also appreciated it if the findings from different case studies had been compared in the Introduction. Moreover, there is substantial room for improvement in the volume’s editing.
All in all, this extensive volume reads well, is thought provoking, and will stimulate further research. Angus would be certainly proud. I can only recommend you to rush to your library and get a copy before someone else does. You will not regret it!
Leandro Prados de la Escosura (firstname.lastname@example.org) is Professor of Economic History at Universidad Carlos III, Madrid, and CEPR Research Fellow. During the academic year 2013-2014 he is Leverhulme Visiting Professor at the LSE where he is researching economic freedom and wellbeing in the long run.
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|Subject(s):||Economic Development, Growth, and Aggregate Productivity|
|Geographic Area(s):||General, International, or Comparative|
|Time Period(s):||20th Century: WWII and post-WWII|