Asia’s miraculous miracle

This essay by Krugman on Asian development was being posted everywhere for a while. Everyone was trying to predict things about China with it, which is of course silly, but it is very useful as a bit of economic history. When writing about pretty much anything, people forget what they had learned in the past and pretend like everything is new. Or they just don’t learn about the past, which is just as bad.

…The leaders of those nations did not share our faith in free markets or unlimited civil liberties. They asserted with increasing self confidence that their system was superior: societies that accepted strong, even authoritarian governments and were willing to limit individual liberties in the interest of the common good, take charge of their economics, and sacrifice short-run consumer interests for the sake of long-run growth would eventually outperform the increasingly chaotic societies of the West. And a growing minority of Western intellectuals agreed.

The gap between Western and Eastern economic performance eventually became a political issue. The Democrats recaptured the White House under the leadership of a young, energetic new president who pledged to “get the country moving again”–a pledge that, to him and his closest advisers, meant accelerating America’s economic growth to meet the Eastern challenge.

The time, of course, was the early 1960s. The dynamic young president was John F. Kennedy. The technological feats that so alarmed the West were the launch of Sputnik and the early Soviet lead in space. And the rapidly growing Eastern economies were those of the Soviet Union and its satellite nations.

…We all do a primitive form of growth accounting every time we talk about labor productivity; in so doing we are implicitly distinguishing between the part of overall national growth due to the growth in the supply of labor and the part due to an increase in the value of goods produced by the average worker. Increases in labor productivity, however, are not always caused by the increased efficiency of workers. Labor is only one of a number of inputs; workers may produce more, not because they are better managed or have more technological knowledge, but simply because they have better machinery. A man with a bulldozer can dig a ditch faster than one with only a shovel, but he is not more efficient; he just has more capital to work with. The aim of growth accounting is to produce an index that combines all measurable inputs and to measure the rate of growth of national income relative to that index–to estimate what is known as “total factor productivity.”

…When economists began to study the growth of the Soviet economy, they did so using the tools of growth accounting. Of course, Soviet data posed some problems. Not only was it hard to piece together usable estimates of output and input (Raymond Powell, a Yale professor, wrote that the job “in may ways resembled an archaeological dig”), but there were philosophical difficulties as well. In a socialist economy one could hardly measure capital input using market returns, so researchers were forced to impute returns based on those in market economies at similar levels of development. Still, when efforts began, researchers were pretty sure about what they would find. Just as capitalist growth had been based on growth in both inputs and efficiency, with efficiency the main source of rising per capita income, they expected to find that rapid Soviet growth reflected both rapid input growth and rapid growth in efficiency.

But what they actually found was that Soviet growth was based on rapid growth inputs–end of story. The rate of efficiency growth was not only unspectacular, it was well below the rates achieved in Western economies. Indeed, by some estimates, it was virtually nonexistent.

It goes on to discuss Singapore, Japan, and China. It is shocking to realize how much improvements in accounting were important to economic analysis. One note to this article: Singapore now has a higher GDP per capita than the USA in PPP terms but not nominal terms.

We all wust Sevastopol

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I’m loving the shots from this old USSR propaganda magazine. Soviet propaganda definitely had the edge in the style wars.russian_magazine1

On a related note, The New York Times has a good article today asking Russians what Americans misunderstand about them. It’s interesting, and there are a few main take-away points:

World War II was all about them. Or so say the ‘official’ histories. It’s called the “Great Patriotic War” and had a much more devastating impact there than here, for obvious reasons. Quote: “Americans likely don’t understand how much the role of the allies in the victory over Nazi Germany and its allies is played down in the conscience of Russians. And Americans likely don’t properly understand the concept of “The Great Patriotic War” in which there is practically no space for Americans themselves.”

Memories of the Soviet Union are complicated. As one responder says, “Also, after the breakdown of the Soviet Union, we did not see many good things, which explains a kind of nostalgia. And apart from everything else, the advantages of an authoritarian state still remain advantages: very low crime rate, absence of massive drug abuse, social stability.” The Soviet Union was powerful, with all the advantages that came with – and now it’s not. Time has a way of making the bad memories go away, especially when the state is trying to wash it all away.

Russians don’t see the actions of their country as belligerent. That’s commonly how news portrays them, right? Always unjustifiably arrogant, pushing buttons, and petulantly grappling with world power. It’s partly historical – “To an extent, it is due to objective reasons, like eastward NATO expansion or deploying ABM radars at our borders. Another reason is a historic feeling of injury for the defeat suffered in the cold war.” Most notable, though:

Americans cannot understand why Russia, which they see as an aggressive country, is seen by Russians as peaceful, though peace-loving and democratic United States is seen by Russians as an aggressor and a threat to peace. However, if we look at the history of the new Russia (after 1991), it fought in a foreign territory only once, and after its citizens were attacked (Georgia, 2008). The United States within the same period of time used its armed forces in foreign territories many times, and all of its pretexts sounded like blatant lies.

I think that last quote pretty much sums it all up. Russians see themselves pretty much the way Americans do. Americans don’t see themselves as belligerent or aggressive – those uses of armed forces were for good, or at worst were the result of a wayward leader unrepresentative of America. It’s wonderful how everyone’s great at rationalizing their faults.