IDEAS home Printed from https://ideas.repec.org/p/cfr/cefirw/w0132.html
   My bibliography  Save this paper

Why the West Became Rich before China and Why China Has Been Catching Up with the West since 1949: nother Explanation of the “Great Divergence” and “Great Convergence” Stories

Author

Listed:
  • Vladimir Popov

    () (New Economic School, Moscow)

Abstract

The goal of this paper is to offer a non-technical interpretation of the “Great Divergence” and “Great Convergence” stories. After reviewing existing explanations in the literature, I offer a different interpretation. Western countries exited the Malthusian trap by destroying traditional institutions, which was associated with an increase in income inequality and even a decrease in life expectancy, but allowed the redistribution of income in favor of savings and investment at the expense of consumption. When the same pattern was imposed on some developing countries (colonialism ?Sub-Saharan Africa (SSA), Latin America (LA), and the Former Soviet Union (FSU)), it resulted in the destruction of traditional institutions, increase in income inequality, and worsening of starting positions for catch-up development. Other developing countries (East Asia (EA), South Asia (SA), and the Middle East and North Africa (MENA countries)) that were less affected by colonialism and managed to retain traditional institutions by the end of the twentieth century found themselves in a better starting position for modern economic growth. The slow-going technical progress finally allowed them to find another exit from the Malthusian trap—increased income that permitted the share of investment in GDP to rise without a major increase in income inequality or decrease in life expectancy. The roots of the impressive long-term performance of China lie in the exceptional continuity of the Chinese civilization—the oldest in the world—that managed to preserve its uniqueness and traditions without major interruptions. It is argued that institutional continuity (East Asia, India, and MENA) is more conducive to growth than attempts to replace existing institutions by allegedly more advanced institutions imported from abroad (Latin America, FSU, and SSA). Like Russia in 1917, China re-established collectivist institutions in 1949 as a response to the failure of Westernization. Unlike Russia after 1991, China in 1979-2009 managed to preserve “Asian values” institutions—priority of community interests over the interests of the individual. However, the rapid increase in income inequality since 1985 could be a sign of weakening of collectivist institutions, which is the single most important threat to the continuation of fast economic growth.

Suggested Citation

  • Vladimir Popov, 2009. "Why the West Became Rich before China and Why China Has Been Catching Up with the West since 1949: nother Explanation of the “Great Divergence” and “Great Convergence” Stories," Working Papers w0132, Center for Economic and Financial Research (CEFIR).
  • Handle: RePEc:cfr:cefirw:w0132
    as

    Download full text from publisher

    File URL: http://www.cefir.ru/papers/WP132.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Polterovich, Victor, 2001. "Трансплантация Экономических Институтов
      [Transplantation of Economic Institutions]
      ," MPRA Paper 22034, University Library of Munich, Germany.
    2. O'Rourke, Kevin Hjortshøj & Williamson, Jeffrey G, 2002. "From Malthus to Ohlin: Trade, Growth and Distribution Since 1500," CEPR Discussion Papers 3394, C.E.P.R. Discussion Papers.
    3. Michael Faye & John McArthur & Jeffrey Sachs & Thomas Snow, 2004. "The Challenges Facing Landlocked Developing Countries," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 5(1), pages 31-68.
    4. Polterovich, Victor & Popov, Vladimir, 2007. "Democratization, Quality of Institutions and Economic Growth," MPRA Paper 19152, University Library of Munich, Germany.
    5. Oded Galor & Omer Moav, 2004. "Natural Selection and the Evolution of Life Expectancy," GE, Growth, Math methods 0409004, EconWPA.
    6. Polterovich, Victor & Popov, Vladimir, 2006. "Stages of Development, Economic Policies and a New World Economic Order," MPRA Paper 20055, University Library of Munich, Germany.
    7. Popov, Vladimir, 2006. "Life cycle of the centrally planned economy: Why Soviet growth rates peaked in the 1950s," MPRA Paper 28113, University Library of Munich, Germany.
    8. Galor, Oded, 2006. "Economic Growth in the Very Long Run," MPRA Paper 76648, University Library of Munich, Germany.
    9. K. H. O'Rourke & R. Sinnott, 2001. "The Determinants of Individual Trade Policy Preferences: International Survey Evidence," CEG Working Papers 20016, Trinity College Dublin, Department of Economics.
    10. Sachs, Jeffrey D. & Warner, Andrew M., 1999. "The big push, natural resource booms and growth," Journal of Development Economics, Elsevier, vol. 59(1), pages 43-76, June.
    11. Vladimir Popov, 2000. "Shock Therapy Versus Gradualism: The End Of The Debate (Explaining The Magnitude Of Transformational Recession)," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 42(1), pages 1-57, April.
    12. Polterovich, Victor & Popov, Vladimir & Tonis, Alexander, 2007. "Resource Abundance, Political Corruption, and Instability of Democracy," MPRA Paper 19154, University Library of Munich, Germany.
    13. Vladimir Popov, 2007. "Shock Therapy versus Gradualism Reconsidered: Lessons from Transition Economies after 15 Years of Reforms1," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 49(1), pages 1-31, March.
    14. Polterovich, Victor & Popov, Vladimir & Tonis, Alexander, 2008. "Mechanisms of Resource Curse, Economic Policy and Growth," MPRA Paper 20570, University Library of Munich, Germany.
    15. Polterovich, Victor & Popov, Vladimir, 2005. "Appropriate Economic Policies at Different Stages of Development," MPRA Paper 20066, University Library of Munich, Germany.
    16. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, April.
    17. Ha-Joon Chang, 2007. "State-Owned Enterprise Reform," Policy Notes 4, United Nations, Department of Economics and Social Affairs.
    18. Polterovich, Victor & Popov, Vladimir, 2003. "Accumulation of Foreign Exchange Reserves and Long Term Growth," MPRA Paper 20069, University Library of Munich, Germany.
    19. Easterly, William & Fischer, Stanley, 1995. "The Soviet Economic Decline," World Bank Economic Review, World Bank Group, vol. 9(3), pages 341-371, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vladimir Popov, 2010. "Development theories and development experience: half a century journey," Working Papers w0153, Center for Economic and Financial Research (CEFIR).
    2. Popov, Vladimir, 2014. "Socialism is dead, long live socialism!," MPRA Paper 54294, University Library of Munich, Germany.
    3. Popov, Vladimir, 2010. "The Long Road to Normalcy," WIDER Working Paper Series 013, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cfr:cefirw:w0132. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julia Babich). General contact details of provider: http://edirc.repec.org/data/cefirru.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.