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Asian Century Hype
Wednesday, 04 April 2012 06:42

There is a lot of hype about the Asian Century.  The Chinese economy will soon exceed America's in size.  Asia's economy will become bigger than the West, as it was from the beginning of time until the 19th century.

All of this is true.  But what is overlooked in these discussions is that the level of Western economic development, as measured by GDP per capita, overtook China in the 14th century, some seven centuries ago.  And there is no likelihood of that reversing in any of our lifetimes.

When Christ was born into the Roman Empire some 2000 years ago, Asia's economy was more than seven times the size of the West.  But Asia's population was seven time bigger.  The levels of economic development, as measured by GDP per capita, of the two regions were about the same.  By the time we reach the year 1000, Asia's GDP per capita had crept a little ahead (about 10%) of the West.

After the year 1000, Western Europe gradually started to emerge from the Dark Ages with the rise of the Italian City states, especially Venice.  Western Europe then overtook China (the leading Asian economy) in per capita GDP in the 14th century.

Western Europe then continued its rise thanks to Portugal, Spain, and the Netherlands, while China and most of the rest of Asia basically stagnated.  From the early 19th century, Western Europe's rise accelerated with the "Industrial Revolution" in England and North-West Europe which also spread to the Western offshoots of America, Canada, Australia and New Zealand.  At this time, China's stagnation shifted to regression due to internal instability (Taiping and Boxer rebellions), and external invasions from Japan, Russia and Western countries.  And then there was civil war.

China would thus find itself in 1950 with a GDP per capita little different from its levels both 1000 and 2000 years ago!  And much of the rest of Asia was in the throws of throwing out its various colonial masters, without having made much progress.  Thus, in 1950 Asia's share of world GDP was less than 20%, while that of the West was 57% -- notwithstanding Asia's vastly higher population.

Japan was the exception to the Asian norm.  In the course of the seventeenth, eighteenth and first half of the nineteenth century, it caught up with and overtook China in per capita income.  The Meiji takeover in 1868 involved a massive institutional change aimed at catching up with the West.  By 1950, Japan's GDP per capita was almost five times that of China, as was also Hong Kong and Singapore.

What to make of all of this?

After centuries of stagnation, Asia's economic rise over the past half century is a miracle which has improved the lives of many Asians, and also improved the lives of people throughout the whole world.  If good policies are maintained, this should continue because it is a process of economic catchup.  Asia is exploiting the benefit of backwardness.  And with a population four times that of the West, the Asian economy should be vastly bigger than the West.

Will China and the rest of Asia fully catch up with the West?

That is more problematic.  Even Japan, always the exception in Asia, still has a GDP per capita 30% less than the US.  And Asia's big 3 of China, India and Indonesia each have GDP's per capita less than 10% that of the US.  They have a long, long way to go.  And as we started, the West has been ahead of Asia for a very, very long time.

 

Reference:

Maddison, Angus.  "The World Economy: a millennial perspective".  Development Centre Studies.  OECD

http://www.oecd.org/document/15/0,3746,en_2649_33731_2744207_1_1_1_1,00.html


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