Tuesday, March 27, 2012

(Mis)Reading history: North Korea v. South Korea, and India v. China

As a graduate student in the late 1980s, which feels like a lifetime ago, I came across quite a few studies that contrasted two pairs of countries for their development trajectories: India and China, and the two Koreas.

Back then, the divergence between India and China--at least on the economic scene--was just about emerging.  The Korean situation, however, was very clear: North Korea was rapidly falling behind South Korea's success.

That divergence between the two Koreas is clear in the chart below, which I picked up from Daniel Drezner's blog:

The divergence was obvious to us grad students only because we were looking at it after the roads had forked.  Drezner quotes Nicholas Eberstadt,
Around the time of Mao Zedong's death (1976), North Korea was more educated, more productive and (by the measure of international trade per capita) much more open than China. Around that same time, in fact, per capita output in North Korea and South Korea may have been quite similar. Today, North Korea has the awful distinction of being the only literate and urbanized society in human history to suffer mass famine in peacetime. 
and then wisely suggests that we keep such charts in mind:
whenever anyone confidently asserts the obvious superiority of a particular model of political economy.  Because, I assure you, there was a point in time when such superiority was far from obvious.
One of my professors from grad school, Peter Gordon, notes in his blog post, which is also on very much a similar point:
It is a cliche that you can never know enough history.  Picking up on Smith, North, Acemoglu, Lal and others, we see that economists can never know enough history. 
Yep. In many posts, like in this one, I have explored the contrasts between India and China.  Yes, there is enormous divergence now.  But, imagine if there is one heck of an unraveling of the Chinese social contract, and the Communist Party loses control, leading to economic declines similar to what happened to Russia after the collapse of the Soviet Union ... Looking back in time after such a situation, will the divergence be that obvious?

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