The divergence over the Great Divergence is narrowing

Stephen Broadberry, Hanhui Guan, and David Daokui Li have updated their impressive paper compiling estimates of Chinese per-capita GDP over about one thousand years (“China, Europe and the Great Divergence: A Study in Historical National Accounting, 980-1850“), with results that help shed light on one of the great debates in economic history: just when and by how much did incomes in Europe start to overtake those in China?

Our estimates indicate that Northern Song China was richer than Domesday Britain circa 1090, but Britain had caught up by 1400. Also, China as a whole was certainly poorer than Italy by 1300, but at this stage, it is quite possible that the richest parts of China were still on a par with the richest parts of Europe.

By the seventeenth century, however, China as a whole was already substantially behind the leading European economies in the North Sea area, despite still being the richest Asian economy. Even allowing for regional variation within China, it is clear that the Great Divergence between China and Western Europe was already well under way by the first half of the eighteenth century, before the start of the Industrial Revolution.

Although this clearly contradicts the early statements of California School writers such as Pomeranz (2000) and Wong (1997), it is broadly consistent with the later views of Pomeranz (2011), who accepts that his early claim of China on a par with Europe as late as 1800 was exaggerated, and is now willing to settle for an earlier date between 1700 and 1750.

We think this is encouraging, because it shows how engagement between researchers using primarily quantitative methods and those who tend to put more weight on qualitative methods can result in a new consensus that challenges the original position of both sides in a major debate.

The California School were right to claim that, taking account of regional variation, historical differences in economic performance between China and Europe were much less than was once thought. However, the early claims of the California School went a bit too far: China and Europe were already on different trajectories before the Industrial Revolution, as European economic historians have traditionally maintained. The Great Divergence did not begin as late as the nineteenth century.

But you don’t have to take their word for it; Kenneth Pomeranz himself has weighed in with a blogpost reviewing some of this recent research:

A recent paper by Stephen Broadberry, Hanhui Guan and David Daokui Li suggests that Britain must have overtaken the Yangzi Delta in per capita GDP by the first quarter of the 18th century. This is, of course, materially different from my claim in The Great Divergence that the Yangzi Delta had not fallen significantly behind until well into the second half of the 18thcentury, and maybe not until 1800…

I think it is noteworthy that a debate between an early and a late 18th century divergence represents a considerably different intellectual landscape than the one we would have if we relied on Maddison’s GDP numbers, or on the non-quantitative work of David Landes, Deepak Lal, and various others – or for that matter, on an earlier attempt by Guan and Li to estimate comparative GDPs, which had previously claimed that a huge gap already existed in the 15th century. …

Admittedly, that is far from the rough parity I had originally suggested at 1800, and would now be inclined to put at somewhere around 1750 instead; there are some plausible adjustments that I think would narrow the gap further, but that is not really the point for now.  Instead I would emphasize that despite continuing disagreements and continuing data problems – the latter of which will probably never be fully solved – we have made some progress in narrowing the range of plausible answers about when and how much divergence occurred in these terms.

On the whole I see this as an example of the virtues of quantification in social science: when disagreements are about empirically measurable quantities, rather than abstract principles, it should be easier to resolve them. But still, how often does that actually happen in economics?

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Welcome to the land of soft openings

I’m about halfway through Ian Johnson’s The Souls Of China: The Return of Religion After Mao , but it’s already clear it’s the China book of the year. Not just because the subject matter is fascinating and undercovered, but also because it is packed with insights about all aspects of contemporary China.

I hope to blog more about the discussion of religion later, but for now I really want to share the following passage, which despite being more or less tossed off as an aside is a fairly profound insight into how China works:

China is the land of soft openings: projects are first announced to big fanfare, structures erected as declarations of intent, and only then filled with content. In this sense, developing a new ideology to unify China is similar to building a shopping mall: the deal is publicized, the building goes up, a few stores open, but only years later are all the shops and restaurants open for business, and only after a number of anchor tenants have gone bankrupt. This makeshift model differs from how Westerns like to see projects–envisioned and planned thoroughly, then completed according to that design. But it has its own logic. If viable, the project goes ahead; if not, backing out is easier.

Keeping this pattern in mind is a good way to maintain a clear head when dealing with the latest grandiose Chinese announcement.

The frenzy of commentary on China’s Belt and Road Initiative has, for instance, generally not done this. Much of this makes the fundamental mistake of not understanding that the initiative is indeed in soft opening mode, and talking about it as if it is a massive and detailed plan for infrastructure development (it isn’t). On the other hand, that doesn’t mean that it’s correct to take all the official rhetoric about shared prosperity at face value, as too many ludicrously overwrought op-ed pieces have. A makeshift structure that gets filled in over time is, I think, exactly the right way to think about it.

 

(Disclosure: Ian is a friend and former colleague, so I was predisposed to like his book. But I’d recommend it anyway.)

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What I’ve been listening to lately

  • Nicole Mitchell – Awakening. Jazz flute often gets a bad rap, but recently I’ve been appreciating how amazing it is in the hands of a master–Rahsaan of course, and the wonderful James Newton. Nicole Mitchell is right up there in the pantheon, and here performs some spectacular vocalized solos in a tight small group backed with guitar, bass, drums.
  • Iggy Pop – Post Pop Depression. Just found out that Iggy Pop put out a new album last year–and surprise, it’s actually good! The backing band is spare and effective, reminiscent of some of his 1970s classics, and Iggy’s mournful baritone is still great.
  • Craig Taborn – Daylight Ghosts. I hadn’t heard Craig Taborn before, but was drawn to this recording because the group includes Chris Speed and Chris Lightcap, who are among my favorites in this generation of jazz musicians. While I haven’t fully digested this unusual, atmospheric and complex recording yet, it’s very worthwhile, evoking minimalism as often as jazz.
  • Steve Lacy Meets The Riccardo Fassi Trio – Dummy. It’s unusual to hear Lacy in the relatively traditional context of a piano-bass-drums backing group, and they do help sand down some of his rougher edges. This is a great, lively recording, often quite lyrical but also with a punchy version of “This Is It,” one of my favorite Lacy tunes.

Why most older Chinese women do not work

Here is an interesting paper by Wenchao Jin with a good account of why Chinese women stop working at such an extraordinarily young age. I like that it is attentive not only to the details of public policy but also of social institutions:

In 2013, the employment rate among 55-64-year-old urban women in China stands at 27%, well below the rates seen in most other countries at all levels of development. The urban female 55-64 employment rate is around 50−55% in the UK, Thailand (which has similar GDP per capita to China) and the Philippines (which has lower GDP per capita). …

The first and foremost explanation is the low pension age for urban women. The biggest public pension schemes set the formal retirement age at 50 for female workers and 55 for female ”cadres” or managers, and 60 for men. However, there are different rules for people with special circumstances like disabilities and compliance is not perfect, so the age at which a woman becomes eligible for a public pension can be as early as 45 or as late as 60. According to the China Health and Retirement Longitudinal Study 2011, 90% of current female pensioners completed the retirement process by 55. …

The second explanation of low employment rate among older females is their adult children. First, (expected) financial transfers from children when one is old and frail reduce the need to accumulate a large stock of assets through working. About 60% of women in their 50s live with their children, and about 70% receive financial support from their non-coresident children in the last year. There is some evidence that the financial transfers from children respond to parental incomes. Thus, transfers from children have a wealth effect as well as an insurance effect, both of which have implications for parents’ decisions on labour supply and saving.

Moreover, demands from adult children for domestic services such as grandchild care mean less time is available for paid work in the market. In urban China, the majority of women have grandchildren before 60 and, conditional on having grandchildren, the majority spend time looking after their grandchildren for an average of more than 30 hours a week. Moreover, I find that urban female employment is significantly negatively correlated with having grandchildren (conditional on her own age, education and so on), and this correlation comes from those women with more educated children. This is consistent with the hypothesis that parents cooperate with their adult children when choosing between market and domestic labour supply and leisure.

Older women are thus both pushed out of the labor force by the official retirement age, and also pulled out by demands of family. At least the first of these factors is likely to change over time, as the Chinese government has confirmed it plans to gradually raise official retirement ages for men and women. (The normal retirement age for women in most OECD countries ranges from 60-67.) The model developed in the paper suggests the effects of this change would be extremely large:

Raising the female pension age from its current level (which varies across individuals and has a mean of 50.6) to 60 would increase the employment rate by 28 percentage points on average over age 50-59. The average age at which women leave the labour force would also increase from 52.9 in the baseline to 55.7.

When provinces fought back against reform

Here is an interesting and little-known episode from the early days of China’s reform era, dealing with the early days of the household responsibility system in the 1980s. The adoption of this system, a fancy name for allowing individual farmers to manage their own plots, is one of the most storied episodes in Chinese economic reform, and is often portrayed as a kind of bottom-up revolution by farmers fed up with collectives.

The household responsibility system did indeed spread rapidly once Deng Xiaoping and the central government endorsed it, but there were some holdouts. The governments of the three northeastern provinces–sometimes called the “little Soviet Union”–had a strong attachment to Soviet- and Mao-style collectives that could practice large-scale mechanized farming, and fought back against the household responsibility system:

Because the problems of collective farming were so widely recognized for so long, unless the center’s preference did not differ, many provinces were willing and eager to adopt the system of household farming. If the new policy could bring about enhanced productivity and increased income, there would be little lost on the part of the provincial authorities. Furthermore, household-based experiments of the 1960s provided some assurance about the workability of the new system.

The same could not be said of a few “resisters”: Heilongjiang, Jilin, and Liaoning. The average compliance rate for these three provinces was only 26.9 percent in December 1982. Even in December 1983, the rate stood at 92.1 percent, still lower than the national average by 6.2 percent. The common factor for these Northeast provinces was a complex relationship between the size of land available to individual households, the average size of a production team, and the specific type of mechanization pursued there. Unlike elsewhere in China, the Northeast provinces had an exceptionally large plot of land for each household, which was not susceptible to manual labor or even small machinery-based mechanization.

Spread of HRS

Heilongjiang, for instance, highlighted the unique characteristics of the province as follows: “Our province has one outstanding difference from the rest of the country: our province is a region of modernized large-scale agriculture…with a mechanization level of 60 percent…. This indicates the advanced level of our production forces. Therefore, the implementation of the household responsibility systems should proceed in accordance with these local characteristics.”

Even after Central Document No. 1 [of 1982] was issued, Heilongjiang was still of the position that the scope of household-based farming was to be confined only to poor teams (accounting for 15 percent of all teams there) with low levels of mechanization and that the pace of implementation should be gradual in accordance with the principle of safeguarding local interests. Liaoning’s and Jilin’s positions differed little from that of Heilongjiang throughout 1982–1983.

Over time, Beijing came to identify the pace of local compliance with the legitimacy of the policy, thereby raising the level of urgency for the reform. Soon, Beijing put political pressure on the noncomplying provinces, starting in the second half of 1982. In July, Premier Zhao Ziyang visited Liaoning and called for an immediate popularization of the household responsibility reform in the Northeast. In August, Hu Yaobang went to Heilongjiang, where he criticized the sluggish pace of decollectivization there. In October, Du Runsheng of the Rural Development Research Center issued a stern warning: “In carrying out the household responsibility reform, we have to continue liberating our ideology and relax control…. A few regions are still unwilling to act on the demands of the masses by refusing to change the ‘one big bowl’ situation.”

Beijing’s pressure reached its apex with the speech by Wan Li, vice-premier in charge of agriculture at the National Agricultural Secretaries Conference in November. Wan remarked: “Comparatively speaking, the household responsibility reform has not been successful in all corners of our countryside. In fact, there exists certain ‘passivity’ in many areas and, in some areas, such passivity is of a very bad sort…. The implementation of contracting to the household has not been very smooth due to the obstruction on the part of some leading cadres.”

Heilongjiang and its first party secretary, Yang Yichen, did not succumb to the pressure from Beijing. One day after the publication of Wan’s speech, Yang delivered his own at the Prefecture, County and City Party Secretaries’ Work Conference: “In determining which responsibility system to implement, we have to value the opinions of the masses that will eventually choose a system on the basis of their local conditions.”

The center drew the last card: personnel reshuffle. In February 1983, Yang Yichen was transferred to Beijing as the supreme people’s procurator-general. Given that his transfer had already been decided in December 1982, Yang’s speech was apparently the last expression of his firm stance on the household responsibility reform. With Yang’s departure, Heilongjiang’s pace of implementation skyrocketed within two months, from 12 percent in December 1982 to 73 percent in February 1983. Because Yang’s successor, Li Li’an, was known to be sympathetic to the decollectivization reform, Heilongjiang’s household responsibility reform took off thereafter.

The quote is from Jae Ho Chung’s Centrifugal Empire: Central-Local Relations in China.

The topic of local resistance to reform seems timely, as it’s emerged as a persistent theme under Xi Jinping. Premier Li Keqiang made headlines in 2014 when he called local officials “passive” and “lax,” and this year Xi Jinping devoted much of a meeting of his reform task force to urging better implementation of reform plans.

The comparison with the 1980s episode helps clarify some of the differences: it doesn’t look like China is experiencing ideologically driven local opposition to specific reforms. Rather, as investigations into the resistance to reform have found, the central government is making huge numbers of contradictory demands on local officials, and then punishing them severely when things go wrong. The result is an understandable lack of willingness to take risks and make commitments, quite the opposite of the valorization of local initiative and experiments in the 1980s.

On Nightfall, What It Is, and Whether It Falls on Us

I enjoyed these passages in A. Roger Ekirch’s At Day’s Close: Night in Times Pasta well-known and well-liked work of social history, where he describes how the term “nightfall” reveals an older way of thinking about night. Not as the absence of light, but as an actual substance descending from the sky. As he points out, “falling” is not in fact an accurate visual description of what happens at sundown:

Rather than falling, night, to the watchful eye, rises. Emerging first in the valleys, shadows slowly ascend sloping hillsides. Fading rays known as “sunsuckers” dart upward behind clouds as if being inhaled for another day. While pastures and woodlands are lost to gloom, the western sky remains aglow even as the sun draws low beneath the horizon. …

Darkness signified more than the temporary absence of light. According to popular cosmology, night actually fell each evening with the descent of noxious vapors from the sky. Night, wrote Richard Niccols in 1610, “did powre grim darknesse downe.” Kept at bay by daylight, descending mists reportedly contributed, no less than the sun’s departure, to the onset of darkness. In Herefordshire, nightfall was known as “drop night.” Some individuals described themselves “within night,” as if enveloped by a mammoth black cloud; in fact, criminal prosecutions in Scottish courts routinely referred to offenses having been committed “under cloud of night.” …

In his essay “On Nightfall, What It Is, and Whether It Falls on Us,” the sixteenth-century French physician Laurent Joubert derided popular fears… he disputed the prevailing notion that “nightfall is a certain rheumatic quality in the evening and night air that falls from the sky.” “There is no evil quality in nightfall air,” he insisted, with night itself being “nothing more than the obscurity or darkness of the air as a result of the absence of the sun.” All the same, the traditional wisdom about nightfall persisted for many years.

The idea of sixteenth-century pamphleteers duking it out over the reality of nightfall, in a sort of archaic version of internet flame wars over climate change, is somehow very pleasing.

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The socialist urbanization series

In 2014, China adopted what it called a “new-style” urbanization policy. But it was more like “everything old is new again.” Rather than resetting priorities, the policy reinforced many of the existing tendencies: a desire to control and even reduce the population of the largest cities, and a preference for pushing population flows into smaller cities.

These goals are now being backed by ever more forceful measures, as the government adopts coercive methods to reduce the population of Beijing and Shanghai, and launches megaprojects to resettle people in entirely new cities. Understanding this development has been a recent obsession of mine. Here’s what I have learned so far: