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Resurgent AsiaDiversity in Development$

Deepak Nayyar

Print publication date: 2019

Print ISBN-13: 9780198849513

Published to Oxford Scholarship Online: November 2019

DOI: 10.1093/oso/9780198849513.001.0001

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Historical perspective and initial conditions

Historical perspective and initial conditions

Chapter:
(p.7) 1 Historical perspective and initial conditions
Source:
Resurgent Asia
Author(s):

Deepak Nayyar

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198849513.003.0001

Abstract and Keywords

This chapter provides a historical perspective on Asia in the world economy with a focus on the colonial era, and sketches a profile of the prevalent initial conditions when Asian countries became independent. Two centuries ago, Asia accounted for two-thirds of world population and almost three-fifths of world income. Its decline and fall during the colonial era, associated with deindustrialization, was attributable to its integration with the world economy, through trade and investment, driven by imperialism. Fifty years ago, then, Asia was the poorest continent in the world. Its even worse demographic and social indicators of development epitomized its underdevelopment. Such initial conditions were the starting point in its journey to development. But most Asian countries did have a long history of well-structured states, and cultures, which were not entirely destroyed by colonialism. Their different pasts, embedded in histories albeit shaped by colonial legacies, also influenced future outcomes in development.

Keywords:   Asia, Cold War, colonialism, colonial legacies, deindustrialization, Europe, Great Divergence, land reform, political independence, underdevelopment

This chapter sets the stage before the play begins. In doing so, it constitutes the starting point for an analysis of economic development in, and the dramatic transformation of, Asia over the past fifty years. It is divided into two parts. The first part, constituted by sections 1, 2, and 3, seeks to provide a historical perspective on the decline and fall of Asia in the world economy during the period from the early nineteenth century to the mid-twentieth century. Section 1 examines the sharp plunge in the share of Asia in world income, and compares levels of per capita income in Asia with those in other parts of the world, to trace the widening gap over time and outline the underlying differences in growth rates. Section 2 traces the progressive integration of Asia with the world economy, through trade, investment and migration, which led to a division of labour between Asia and Western Europe that was unequal in its consequences for development. Section 3 outlines the rapid decline in Asia’s share of industrial production or manufacturing output in the world economy, to highlight the factors that led to its deindustrialization. The second part, constituted by sections 4, and 5 sets out the initial conditions that characterized Asian economies in the early post-colonial era, when it was the poorest continent in the world. Section 4 sketches a picture of the initial conditions in Asia, circa 1965, presenting evidence on selected demographic, social, and economic indicators, which epitomize its underdevelopment at the time. Section 5 discusses how these initial conditions might have been influenced, perhaps even shaped, by history and by the conjuncture at the end of the colonial era.

1. Asia in the world

A long-term historical perspective was largely missing from Asian Drama (Myrdal, 1968), which sought to focus on the early post-colonial era in an underdeveloped Asia. Its historical narrative began in the early twentieth century with a global perspective, to suggest that the First World War, the Russian Revolution which led to the rise of the Soviet Union, the Great Depression that was responsible for the economic crisis and conflict in the West, the emergence of Japanese colonialism in East Asia, and the Second World War which led (p.8) to Japanese occupation of much of Southeast Asia, taken together, weakened European colonialism to strengthen nationalisms in Asian countries. The essential focus, however, was on the coming of independence and the transfer of power in the erstwhile colonies, in South Asian and Southeast Asian countries that were the object of study. This short digression into history was concerned more with the political implications than with the economic consequences of European colonialism in Asia.1 It was a largely Western perspective, even if it was through a Nordic lens. It did not quite recognize that the observed backwardness and underdevelopment of Asia might have been a consequence of colonialism, or that Asia and Europe might have been similar in terms of their levels of development in the mid-eighteenth century. Obviously, this historical perspective was not long enough to recognize the overwhelming significance of Asia in the world economy during the first half of the second millennium. Such a long-term historical perspective about Asia and the world economy spanning the second millennium is provided by Findlay (2019).2 However, the focus of the discussion that follows is on the period from 1820, when the decline and fall of Asia in the world economy began, to 1962, when it reached its nadir.

1.1 Shares in world income and population

The significance of Asia in the world economy is reflected in the changes in its share of income and population in the world. Such an exercise is possible as there are studies by Angus Maddison that provide estimates of long-term changes in world population and world income, dis-aggregated by regions and country-groups, for selected benchmark years.3 The Maddison estimates of gross domestic product (GDP) are in 1990 international (Geary–Khamis) dollars, in purchasing power parity (PPP) terms, which are used to evaluate output. These calculations are based on a specific method of defining international prices so as to facilitate cross-country comparisons over time.4 Although these estimates are subject to criticism in the academic literature on economic history,5 this is about the only source of historical statistics which is widely used. Even so, it is important to recognize these limitations and use other sources wherever possible to provide confirmation.

In the year 1000, Asia accounted for 66 per cent of world population and 68 per cent of world income. Even 500 years ago, in 1500, it accounted for about 62 per cent of both world population and world income. In both years, China and India, taken together, accounted for 50 per cent of world population and world income. The beginnings of change are discernible over the next three centuries. By 1820, the share of Asia in world population returned to 66 per cent but its share of world income dropped to 57 per cent. Yet, China and India together accounted for almost 50 per cent of world income even in 1820 (Nayyar, 2013).

(p.9) Table 1.1 presents evidence on the share of ‘The West’ and ‘The Rest’ in world population and world GDP for selected benchmark years from 1820 to 1962. It needs to be said that these estimates starting from 1820 are far more robust, in terms of their statistical foundations, than the estimates for earlier years cited above, which are indicative numbers rather than precise statistics. Between 1820 and 1962, the share of ‘The West’ in world income almost doubled from 37 per cent to 73 per cent, and the share of ‘The Rest’ more than halved from 63 per cent to 27 per cent, of which the share of Asia plummeted from 57 per cent to 15 per cent. This transformation started around 1820. It was discernible by 1870, (p.10) when the share of ‘The West’ in world income rose to 57 per cent, and the share of ‘The Rest’ fell to 43 per cent, while the share of Asia dropped to 36 per cent. The dramatic decline and fall in the relative importance of Asia occurred in just 140 years, which was a short span of time in world history. It was the Asia that Gunnar Myrdal studied in the early 1960s.

Table 1.1 Shares of the West and the Rest in world population and world GDP: 1820–1962

World population

1820

1870

1900

1913

1940

1950

1962

THE WEST

25.6

32.2

35.8

36.8

35.2

33.0

30.9

Western Europe

12.8

14.7

14.9

14.6

12.8

12.1

10.6

Western Offshoots

1.1

3.6

5.5

6.2

6.7

7.0

7.0

Eastern Europe

3.5

4.2

4.5

4.4

4.1

3.5

3.2

Former USSR

5.3

7.0

8.0

8.7

8.5

7.1

7.1

Japan

3.0

2.7

2.8

2.9

3.2

3.3

3.1

THE REST

74.4

67.8

64.2

63.2

64.8

67.0

69.1

Latin America

2.1

3.2

4.1

4.5

5.7

6.5

7.3

Africa

7.1

7.1

7.0

7.0

8.4

9.0

9.5

Asia (of which)

65.2

57.6

53.0

51.7

50.7

51.5

52.2

China

36.6

28.1

25.6

24.4

22.6

21.6

21.2

India

20.1

19.8

18.2

16.9

16.8

14.2

14.5

Indonesia

2.6

3.0

2.3

1.9

1.7

1.5

1.1

World GDP

1820

1870

1900

1913

1940

1950

1962

THE WEST

36.9

57.4

67.4

70.4

71.0

72.9

73.4

Western Europe

22.9

33.0

34.2

33.0

29.7

26.2

27.2

Western Offshoots

1.9

10.0

17.6

21.3

23.2

30.7

27.6

Eastern Europe

3.6

4.5

5.2

4.9

4.1

3.5

3.6

Former USSR

5.4

7.5

7.8

8.5

9.3

9.6

10.0

Japan

3.0

2.3

2.6

2.6

4.7

3.0

5.0

THE REST

63.1

42.6

32.6

29.6

29.0

27.1

26.6

Latin America

2.2

2.5

3.6

4.4

5.6

7.8

8.1

Africa

4.5

4.1

3.4

2.9

3.5

3.8

3.5

Asia (of which)

56.5

36.1

25.6

22.3

19.9

15.6

14.9

China

33.0

17.1

11.1

8.8

6.4

4.6

4.0

India

16.1

12.2

8.6

7.5

5.9

4.2

3.8

Indonesia

1.6

1.7

1.6

1.7

1.9

1.2

1.1

Source: Author’s calculations from Maddison Online Database, see Appendix.

These striking changes in shares of world income are broadly consistent with evidence from other sources. Bairoch (1981 and 1983) estimates GNP in selected benchmark years from 1750 to 1950 for two country-groups in the world economy: Asia, Africa, and Latin America; and Europe, North America, and Japan. These estimates are in 1960 US dollars and prices, in PPP terms, adjusted for differences in the purchasing power of currencies. The share of Asia, Africa, and Latin America in world GNP was 69.1 per cent in 1830 and 57.4 per cent in 1860 (somewhat higher than the Maddison estimates of 63.1 per cent in 1820 and 42.6 per cent in 1870). This share dropped sharply to 38.3 per cent in 1900 and 33.5 per cent in 1913 (closer to the Maddison estimates of 32.6 per cent in 1900 and 29.6 per cent in 1913). It was 30.2 per cent in 1928 and 27.5 per cent in 1950 (almost the same as the Maddison estimates of 29 per cent in 1940 and 27.1 per cent in 1950). It would seem that the Bairoch estimates of these shares of ‘The Rest’ in world income are higher than the corresponding Maddison estimates, particularly during the nineteenth century, but the rise of ‘The West’ and the decline of ‘The Rest’ are just as clear (Nayyar, 2013).

In view of the pronounced decline of Asia, it may be misleading to consider ‘The Rest’ as an aggregate. Figure 1.1a separates Asia, Africa, and Latin America in terms of their shares of world population and world GDP during the period 1820 to 1962. It shows the sharp increase in the asymmetry between Asia’s share of world population and world GDP over time, as the former declined slowly while the latter dropped sharply so that the gap between the two shares jumped from a modest 9 percentage points in 1820 to a massive 37 percentage points in 1962.6 For Africa, the shares in world population and GDP were relatively stable, although the latter was consistently lower. For Latin America, the shares in world population and world GDP were symmetrical throughout and both proportions rose significantly over the period so that the gap between the two shares was minimal while its share in world GDP more than trebled. Indeed, it would seem that Latin America was the success story among ‘The Rest’ in this era.7 In sharp contrast, Asia was a story of dismal failure, which was concentrated in the two Asian giants. Between 1820 and 1962, taken together, the share of China and India in world GDP plummeted from 49 per cent to 8 per cent, while their share in world population fell from 57 per cent to 36 per cent. This rapid increase in the asymmetry between their shares in world population and world GDP, from 8 percentage points to 28 percentage points, is clearly depicted in Figure 1.1b. It also shows that for Indonesia—Asia’s third largest country—shares in world GDP and population, though small, were broadly symmetrical.

Historical perspective and initial conditions

Figure 1.1a Shares of Asia, Africa and Latin America in world GDP and population: 1820–1962, Figure 1.1b Shares of China, India and Indonesia in world GDP and population: 1820–1962

Source: Table 1.1.

(p.11) (p.12) 1.2 Divergence in per capita incomes

It is most difficult to compare levels of per capita income across countries and regions in the world economy during the first 750 years of the second millennium. The available estimates are at best rough approximations. The Maddison estimates of GDP per capita, in 1990 international (Geary–Khamis) dollars, show that levels of income per capita were about the same across the world 1000 years ago and not significantly different even 500 years ago. Thus, it is no surprise that shares in world population and world income were roughly symmetrical for regions and country-groups (Nayyar, 2013). Average life expectation at birth was also similar everywhere in the world (Maddison, 2001). But this situation changed in the centuries that followed.

The Maddison statistics show that the ratio of income per capita in Asia to that in Western Europe was 1.11 in 1000, 0.74 in 1500, 0.65 in 1600, and 0.58 in 1700. Of course, the comparison often made is that between Western Europe and Asia in the mid-eighteenth century. There are two contesting views. Landes (1969) argues that Western Europe was already rich in comparison with other parts of the world even before the Industrial Revolution, which was attributable to centuries of slow capital accumulation, the appropriation of resources from outside Europe and substantial technological progress. Kuznets (1971) endorsed this view, indirectly, by suggesting that per capita income levels in less developed parts of the world in 1965 were much lower than in Western Europe before industrialization. This hypothesis was supported by Maddison (1983). Such analysis is the basis of the view that, circa 1750, income per capita in Western Europe was roughly twice that in Asia. In contrast, Bairoch (1981) shows that, in 1750, the average standard of living as measured by GNP per capita, in the now industrialized countries was slightly lower than that in countries he describes as the Third World.

It is almost impossible to resolve this debate one way or the other, since different assumptions about growth rates and different adjustment factors can and do produce very different results.8 There is, however, research beyond statistics on income per capita. It suggests that, in the mid-eighteenth century, levels of development in Europe and Asia were broadly similar in terms of demography, technology, and institutions.9

Table 1.2 compares GDP per capita in Western Europe and Western Offshoots (United States, Canada, Australia, and New Zealand), taken together, with GDP per capita in other regions and countries of the world during this period that spanned just over 140 years. It reveals a rapidly widening gap, far more pronounced in Asia than elsewhere, which has been described as the ‘Great Divergence’. Between 1820 and 1962, as a proportion of GDP per capita in what is now the industrialized world, in approximate terms, GDP per capita in Latin America dropped from three-fifths to one-third, in Africa from one-third to one-eighth and in Asia from one-half to one-tenth. This divergence was significantly less in (p.13) Japan and the former USSR. Latin America experienced the divergence only until 1870 and fared much better thereafter. The divergence in Africa was uninterrupted but somewhat less. Asia was the disaster story. Its GDP per capita, compared with that of Western Europe and Western Offshoots, dropped from 48 per cent to 9 per cent. Much of this collapse was attributable to its three largest economies, particularly its two giants, as the same proportions dropped from 50 per cent to 6 per cent in China, from 45 per cent to 8 per cent in India, and from 51 per cent to 11 per cent in Indonesia. The Bairoch (1981) estimates of GNP per capita, for selected benchmark years from 1800 to 1950, reveal a similar striking divergence between ‘The West’ and ‘The Rest’, to provide confirmation, although these do not provide any separate estimates for Asia (Nayyar, 2013).

Table 1.2 Divergence in GDP per capita between Western Europe–Western Offshoots and rest of the world: 1820–1962

GDP per capita ratios

1820

1870

1900

1913

1940

1950

1962

Western Europe and Western Offshoots

100

100

100

100

100

100

100

Eastern Europe

57.2

45.8

45.1

42.5

36.9

33.6

35.8

Former USSR

57.6

46.1

38.8

37.3

40.2

45.2

45.7

Japan

56.0

36.1

37.0

34.8

53.9

30.5

52.7

Latin America

57.8

33.1

34.9

37.5

36.2

39.9

35.7

Africa

35.1

24.5

18.8

16.0

15.2

14.1

11.8

Asia (of which)

48.3

26.6

19.1

16.5

14.4

10.1

9.2

China

50.2

25.9

17.1

13.8

10.5

7.1

6.1

India

44.6

26.1

18.8

16.9

12.9

9.8

8.4

Indonesia

51.2

28.3

22.1

21.9

21.8

12.8

11.4

Source: Author’s calculations from Maddison Online Database, see Appendix.

1.3 Disparities in growth rates

Over time, for regions, country-groups or countries, differences in their GDP growth rates underlie their changing shares in world GDP, while differences in their GDP per capita growth rates underlie divergences in their per capita incomes. Table 1.3 presents evidence on growth rates in GDP and GDP per capita for the periods 1820–1870, 1870–1913, 1913–1950 and 1950–1962. These growth rates are based on the Maddison estimates of GDP and GDP per capita, in 1990 international (Geary–Khamis) dollars, in the selected benchmark years.

Table 1.3 Growth rates in the world economy by regions: 1820–1962 (per cent per annum)

GDP

1820–1870

1870–1913

1913–1950

1950–1962

THE WEST

Western Europe

1.68

2.12

1.19

4.93

Western Offshoots

4.31

3.92

2.83

3.66

Eastern Europe

1.41

2.33

0.86

4.89

Former USSR

1.61

2.40

2.15

5.00

Japan

0.41

2.44

2.21

9.10

THE REST

Latin America

1.22

3.52

3.39

4.98

Africa

0.75

1.32

2.56

3.87

Asia (of which)

0.04

0.98

0.84

4.23

China

−0.37

0.56

0.04

3.41

India

0.38

0.97

0.23

3.71

Indonesia

1.1

1.75

0.77

3.76

GDP per Capita

1820–1870

1870–1913

1913–1950

1950–1962

THE WEST

Western Europe

0.99

1.34

0.76

4.18

Western Offshoots

1.41

1.81

1.56

1.82

Eastern Europe

0.63

1.39

0.60

3.65

Former USSR

0.63

1.06

1.76

3.19

Japan

0.19

1.48

0.88

7.89

THE REST

Latin America

−0.04

1.86

1.41

2.14

Africa

0.35

0.57

0.90

1.55

Asia (of which)

−0.11

0.43

−0.08

2.26

China

−0.25

0.10

−0.56

1.73

India

0.00

0.54

−0.22

1.70

Indonesia

−0.11

0.83

−0.17

2.15

Source: Author’s calculations from Maddison Online Database, see Appendix.

The dramatic decline in the share of Asia in world income from 1820 to 1950 was attributable to its much slower GDP growth as compared with every other part of the world. The problem was even more acute for China and India. (p.14) The marked revival of growth in Asia and its three giants in the early post-colonial era, 1950–1962, slowed down but did not stop this decline in shares. In contrast, the rise in the share of Latin America in world GDP from 1870 to 1962 was attributable to its GDP growth rates, which were higher than everywhere in the world except Western Offshoots during 1870–1913 and Japan during 1950–1962. The share of Africa in world GDP was broadly maintained during 1820–1870, dipped in 1870–1913, but recovered during 1913–1950 to remain there during 1950–1962, on account of its respectable GDP growth, except in the second period. For Western Europe, its GDP growth rate, compared with others, accounts (p.15) for the increase in its share of world GDP during 1820–1870, the stability in its share during 1870–1913, a decrease in its share during 1913–1950, and some recovery during 1950–1962. For Western Offshoots, much higher GDP growth rates than elsewhere in the world, attributable largely to the United States, account for the continuous increase in their share of world GDP throughout the period 1820–1950 with a modest decline during 1950–1962 as growth elsewhere also gathered pace.

The divergences in incomes per capita over time reflect differences in GDP per capita growth rates. The widening gap experienced by Asia was attributable to GDP per capita growth rates that were negative over long periods, 1820–1870 and 1913–1950, and barely positive at 0.4 per cent per annum during 1870–1913, when these growth rates were much higher almost everywhere. China, India, and Indonesia fared even worse. It was the power of compound growth rates over 130 years that led to the striking divergence in incomes per capita, driven mostly by faster growth elsewhere but partly by an absolute decline, albeit small, in Asia. The respectable GDP per capita growth rates in Asia during the early post-colonial era, 1950–1962, slowed down this divergence but could not reverse it. For Western Europe, GDP per capita growth rates were in the range 0.8–1.3 per cent per annum (but much higher at 4 per cent per annum during 1950–1962), and for Western Offshoots in the range 1.4–1.8 per cent per annum, which were modest by contemporary standards. It is just that these growth rates were significantly lower elsewhere during 1820–1870. However, during 1870–1913 and 1913–1950, these growth rates were higher in Latin America and comparable in Japan, but distinctly lower in Africa.10 It is worth noting the phenomenal spurt in growth of GDP per capita in Japan, during 1950–1962, at almost 8 per cent per annum, which was perhaps a sign of times to come.

2. Integration with the world economy

Asia and Africa have been engaged with the world economy for at least a millennium if not longer. So has South America since the discovery of the New World. The nature and degree of this engagement may have changed over time through different epochs of globalization. The focus here is on Asia and its economic integration with the world, through trade, investment, and migration across borders, during the period from the early nineteenth to the early twentieth century.

The integration of Asia with the world economy through international trade increased steadily in these 100 years to reach its zenith during 1870–1914. The belief that this expansion in international trade was attributable to trade liberalization is misleading if not wrong. In fact, free trade was imposed on Asia as imperialism prised open markets through gunboat diplomacy or colonial dominance. In 1842, China signed a treaty with Britain which opened its markets to trade (p.16) and capped tariffs at 5 per cent. In the 1840s, free trade was imposed on India by Britain and on Indonesia by the Netherlands. In 1858, Japan signed the Shimoda-Harris treaties, persuaded by the American gunboats of Commodore Perry to switch from autarchy to free trade. Korea followed the same path through its forced opening and then annexation by Japan.11

Latin America was different. The unequal treaties signed in the early 1800s, before independence, expired in the 1870s, after which tariff levels in Latin America were the highest in the world, leading to rapid industrialization and economic growth (Clemens and Williamson, 2002). Asia was just the opposite. In the late nineteenth and early twentieth centuries, India, China, and Indonesia practiced free trade, as much as Britain and the Netherlands, with average tariff levels that were close to negligible in the range of 3–5 per cent (Nayyar, 2006). In contrast, tariff levels in Germany, Japan, and France were significantly higher at around 12–18 per cent, whereas tariff levels in the United States were much higher at 40–50 per cent.12

During the period 1870–1914, a large proportion of this international trade consisted of inter-sectoral trade, exchanging primary commodities for manufactured goods. The leading trading nation in this era, Britain exported manufactures to, and imported primary commodities from Asia (Foreman-Peck, 1983).13 Much the same was true of northwest Europe. North America exported primary commodities for some time but, by 1914, rapid industrialization there also turned the United States into a net exporter of manufactures (Findlay and O’Rourke, 2007). The international division of labour implicit in this pattern of trade was aptly described as the ‘Great Specialization’ (Robertson, 1938). This specialization was proactively shaped by colonialism and imperialism through the development of mines and plantations.14

The geographical spread and economic significance of international investment in this era matched that of international trade. But evidence on Asia alone is not available. The gross value of the stock of foreign capital in Asia, Africa, and Latin America, at current prices, increased from $5.3 billion in 1870 to $11.3 billion in 1900 and $22.7 billion in 1914 (Maddison, 1989, p. 30). This was the equivalent of 32 per cent of the GDP of fifteen selected countries in Asia and Latin America in 1900, which were the major destinations for investment from abroad (Nayyar, 2013). It has also been estimated that in 1914 total foreign investment in the world economy was $44 billion, of which $30 billion was portfolio investment while $14 billion was direct investment (Dunning, 1983). In terms of destination, it was distributed as follows: $14 billion in Europe (32 per cent), $10.5 billion in the United States (24 per cent), $8.5 billion in Latin America (19 per cent) and $11 billion in Asia and Africa (25 per cent). In terms of origin, it was far more concentrated: $19 billion from Britain (43 per cent), $9 billion from France (21 per cent), $6 billion from Germany (13.5 per cent), $5.5 billion from Belgium (12.5 per cent), and $4.5 billion from the United States (10 per cent). Thus, in (p.17) 1914, 44 per cent of foreign investment was in Asia, Africa, and Latin America but 90 per cent of it came from Europe (UNCTAD, 1994, p. 158).

Around the same time, in 1913, the primary sector accounted for 55 per cent of long-term investments in the world, transport, trade, and distribution accounted for 30 per cent, while manufacturing accounted for only 10 per cent and much of that was concentrated in the United States or Europe (Dunning, 1983). It would seem that during the late nineteenth and early twentieth centuries, Asia, Africa, and Latin America, were integrated into the world economy as sources of primary commodities through international investment in mines and plantations, supported by connectivity from the hinterland to ports, in an international division of labour shaped through trade and driven by imperialism.

This process of economic integration extended to international migration. The abolition of slavery in the British Empire was followed by the movement of indentured labour which was yet another form of servitude. Starting around the mid-1830s, for a period of fifty years, about 50 million people left India and China to work as indentured labour on mines, plantations, and construction in the Americas, the Caribbean, southern Africa, Southeast Asia, and other distant lands (Tinker, 1974 and Lewis, 1978). This was probably close to 10 per cent of the total population of India and China circa 1880 (Nayyar, 2002b). The destinations were mostly British, Dutch, French, and German colonies. But the United States and Latin America were important destinations where indentured labour also came from Japan. This was followed by a somewhat different form of international migration from Asia associated with colonialism, during the periods 1900–1914 and 1919–1938, as white-collar workers (many among whom worked for British colonial governments) and people engaged in trade and commerce (who were not available in local populations) moved, particularly from India, to countries in Africa, the Middle East, and Southeast Asia that were part of the British Empire.

The migration of people from India and China as indentured labour for mines and plantations, together with the movement of capital from European countries, sought to exploit natural resources or climatic conditions in Southeast Asia, southern Africa, and the Caribbean. In this process, contrary to the dominant construct in orthodox trade theory, international movements of capital and labour were complements and not substitutes (Nayyar, 1998). Similarly, the migration of white-collar workers and traders from India to other countries in the British colonial empire where these skills did not exist, or were scarce, served important needs of colonialism. In either case, international migration was critical in the evolution of the world economy from the 1830s to the 1930s (Nayyar, 2013).

In retrospect, it is clear that this era witnessed a progressive integration of Asia into the world economy, as 1870 was a turning point in the shift from colonialism to imperialism. The process may have gathered momentum in the ‘Age of Empire’ from 1870 to 1914 (Hobsbawm, 1987), but it evolved over a period that spanned (p.18) more than a century (Findlay and O’Rourke, 2007). It was driven by the economic and political interests of Western Europe. It also coincided with the decline and fall of Asia. This evolution of the international economic order led to a profound change in the balance of economic and political power in the world. It was attributable to three developments. The first was the Industrial Revolution in Britain in the late eighteenth century, which spread to Western Europe, even if slowly, during the first half of the nineteenth century. The second was the transformation of colonialism driven by economic interests into imperialism driven by political quests for empires, which reinforced each other. The third was the revolution in transport and communication in the mid-nineteenth century, manifest in the railway, the steamship, and the telegraph, which dismantled barriers in distance and time. These three developments, which overlapped in time, transformed the world economy by creating patterns of specialization in production, associated with a division of labour through trade and investment, reinforced by the politics of imperialism.

3. Deindustrialization of Asia

The share of Asia in world population and world income was overwhelmingly large until 1500. These shares diminished over the next 300 years, but were still substantial in 1820. Similarly, the significance of Asia in the manufacturing capacities of the world was also enormous. Indeed, during the seventeenth and eighteenth centuries, the world economy was characterized by a flow of manufactured goods from Asia to Europe that was paid for by a flow of silver from Europe to Asia (Findlay and O’Rourke, 2007). Trade in spices was just one part of the story. Cotton textiles from India and porcelains or silks from China were much sought after in Europe. And some of the most dynamic sectors in eighteenth-century Europe were seeking to imitate and compete against goods from Asia (Parthasarathi, 2011).

In a study of industrialization levels across the world since 1750, Bairoch (1982) provides estimates of manufacturing production for selected regions, country-groups and countries. Table 1.4, based on these estimates, outlines the changes in the distribution of manufacturing production in the world economy from 1750 to 1963. It makes a distinction between two groups of continents and countries: the first is made up of Europe, North America, and Japan, described by Bairoch as ‘Developed Economies’, while the second is made up of Asia, Africa, and Latin America, described by Bairoch as the ‘Third World’. Manufacturing production covers the entire range of output without differentiating between technology levels or organizational structures. Thus, it includes both the traditional sector with production by craftsmen, and modern industry with production in factories. The figures are based on triennial or quinquennial annual averages to eliminate the impact of short-term fluctuations.

Table 1.4 Distribution of manufacturing production in the world economy: 1750–1963 (in percentages)

Year

Europe, North America, and Japan

Latin America, Africa, and Asia

(of which)

China and India

World

1750

27.0

73.0

57.3

100

1800

32.3

67.7

53.0

100

1830

39.5

60.5

47.4

100

1860

63.4

36.6

28.3

100

1880

79.1

20.9

15.3

100

1900

89.0

11.0

7.9

100

1913

92.5

7.5

5.0

100

1928

92.8

7.2

5.3

100

1938

92.8

7.2

5.5

100

1953

93.5

6.5

4.0

100

1963

91.5

8.5

5.3

100

Source: Bairoch (1982).

(p.19) Table 1.4 shows that Asia, Africa, and Latin America, taken together, accounted for almost three-fourths of world industrial output in 1750, much of it in Asia, since just China and India accounted for almost three-fifths of world industrial output. These shares remained high, even if lower, at 68 per cent in 1800 (with China and India contributing 53 per cent) and 61 per cent in 1830 (with China and India contributing 47 per cent), but plummeted to 21 per cent in 1880 (with China and India contributing 15 per cent) and a mere 7.5 per cent in 1913 (with China and India contributing 5 per cent). For the next forty years, these proportions remained around that level, and rose just a little over the next ten years in the early post-colonial era. The distribution of industrial output between China and India was roughly in the proportion 60:40 during 1750–1860 and 1913–1963, while it was 75:25 during 1860–1913, which suggests that deindustrialization in India was even more than in China.15 Over the same period, the share of Europe, North America, and Japan in world industrial output rose from 27 per cent in 1750 to 40 per cent in 1830, 79 per cent in 1880 and 92.5 per cent in 1913. In fact, the proportional contribution of the two groups of continents and countries to world manufacturing production was almost reversed in just thirty years, between 1830 and 1860. Yet, in 1860, China ranked second and India third, just below Britain ranked first, but above France fourth, United States fifth and Germany sixth, in the world in terms of total manufacturing output (Bairoch, 1982, p. 284). Surprisingly, in total manufacturing output in the world, China ranked seventh in both 1913 and 1953, while India ranked eleventh in 1913 and tenth in 1953, essentially because of their size.

It is not possible to compare how productivity per worker in manufacturing changed over time in these two parts of the world because there is no evidence on (p.20) the number of persons employed in the industrial sector. Thus, Bairoch studied levels of industrialization in terms of manufacturing production per capita. The results of this exercise are just as striking. The ratio of manufacturing production per capita in Asia, Africa, and Latin America to that in Europe, North America, and Japan, dropped from 7:8 in 1750 and 3:4 in 1800 to 1:4 in 1860, 1:8 in 1880, 1:17.5 in 1900, and 1:27.5 in 1913, but this ratio did not worsen thereafter at 1:27 in 1953 and 1:24 in 1963. In the same selected years, these ratios were almost the same for China and India, although India fared somewhat worse from 1860 to 1913.16 But in terms of manufacturing output per capita, China and India were not even among the top twenty countries in the world in 1860, let alone in 1913 or 1953, given their large populations.

The revolutionary change in methods of manufacturing, which were developed in Britain in the late eighteenth century and spread to countries in Western Europe through the early nineteenth century, meant profound changes in the economic life of Europe.17 Innovation, followed by continuous improvements in technologies, yielded sharp increases in productivity, output and incomes. The rapid diffusion of the new technologies, combined with their geographical spread, brought about rapid industrialization in Britain, Belgium, Netherlands, France, and Germany. This industrialization in Western Europe, associated with scale economies that sharply reduced prices of manufactured goods, led to the demise of traditional industries in Asia, particularly India and China, so that the outcome was deindustrialization in Asia except for Japan.18 Consequently, the knowledge and skills that had been developed in Asia over centuries were slowly but surely eroded and diminished. Thus, the nineteenth century witnessed a divergence not just in incomes but also in labour productivity, skill levels, and technological capabilities. The consequent path dependence had long-term consequences for development.

The obvious cause of this deindustrialization in Asia was the much greater competitiveness of industry in Britain and Western Europe. But that was not all. The transport revolution of the nineteenth century dismantled the natural protection, which was provided by the distance and time implicit in geographical barriers, to handicrafts or manufacturing industries in countries such as India and China (Nayyar, 2006; Findlay and O’Rourke, 2007). The advent of the steamship reduced the cost of ocean freight by two-thirds between 1870 and 1900 (Lewis, 1978). The spread of the railways, everywhere, brought the hinterland of countries into the world economy, not only to source raw materials but also to sell manufactured goods (Nayyar, 2006). It would have required high tariffs, possibly even an exclusion of imports through prohibitive protection, for India and China, or countries in Asia, to neutralize the impact of the revolutions in industry and transport on prices of manufactures imported from Britain or Western Europe. Of course, colonialism and imperialism meant that countries in Asia did not have the freedom to use tariffs for protecting domestic industries. The mix of gunboat (p.21) diplomacy and colonial dominance, as noted above, imposed free trade on China, India, Indonesia, Japan, and Korea.19 There was sustained productivity growth with industrialization in Western Europe and a steady productivity decline with deindustrialization in Asia. This widening productivity gap was the basic factor underlying the divergence in per capita incomes between Western Europe and Asia.

The world economy was divided into countries (mostly with temperate climates) that industrialized and exported manufactures, and countries (mostly with tropical climates) that did not industrialize and exported primary commodities. The ‘Great Divergence’ in incomes between these countries was closely related to the ‘Great Specialization’ in division of labour between countries. Slowly but surely, these countries became dependent on the industrializing countries in Western Europe, not simply for markets and finance but also as their engine of growth (Lewis, 1978). Much of Asia, except Japan, was colonized de jure or de facto, placing it on the wrong side of this divide, which led to its deindustrialization and underdevelopment.

4. Initial conditions in post-colonial Asia

Initial conditions prevalent in countries must relate to a specific point in time. For our purpose, it was the end of the colonial era. These conditions always matter in any process that shapes trajectories of development. After all, where a country starts out from is bound to exercise some influence on the journey and the destination. Initial conditions are shaped by history embedded in the past. Initial conditions could be influenced by their context in the present. And initial conditions do, in turn, shape outcomes in the future. Of course, this cannot be reduced to a deterministic view that initial conditions are immutable, or given once and for all, for these might have to be, and often are, reshaped, reconstructed, or recreated to kick-start development.

It is no surprise then that Asian Drama placed a strong emphasis on initial conditions. In an interactive mode, these could be a powerful constraint which might even perpetuate underdevelopment through cumulative causation by creating vicious circles such that poor countries and poor people remain poor.20 Myrdal’s focus, however, was on differences in initial conditions between South Asia, as a proxy for Asia, and Western Europe, before the Industrial Revolution, at comparable stages of development. The choice of a comparable period posed a dilemma for Myrdal (1968, p. 675):

One thing is certain: at the beginning of what we recognize as the industrial revolution—or, more precisely, their industrial revolutions—the Western countries had behind them many years—in some cases centuries—of social, political (p.22) and also incipient economic development; in a number of ways they were already much more favourably situated than South Asia is today. In many respects, therefore the period of comparison should be fixed centuries before the industrial revolutions in the West.

Thus, the period of comparison in the history of Western countries was left vague but, in effect, it was circa 1750.

Some initial conditions, such as natural resource endowments and climate, Myrdal thought, were near-constants over time. Even so, he was concerned that most countries in Asia except for a few, were natural-resource-scarce, and that much of Asia had tropical climates while industrialization and development had always been concentrated in temperate climates. He was also concerned that population growth rates in Asia were so much higher than in the West two centuries earlier, which could only constrain possibilities of development. International trade and capital movements were seen as an important difference. While rapid trade expansion and significant private capital movements had facilitated development in the West, for Asia ‘the epoch of rapidly growing export markets has ended’ (p. 683) and he saw little prospect of international private capital movements at the time. The comparison led him to argue that economic levels (income, savings, and investment), institutions (political, social, and economic) and attitudes (to work and life) constituted initial conditions that were a formidable obstacle to development in Asia. Two centuries later, the availability of modern technology was an opportunity but it was also a challenge because of skill shortages and learning capacities in Asia, or the inappropriate nature of such technologies, particularly in agriculture. The problem, he believed, was accentuated by the rapid pace of technical progress.21

Myrdal was absolutely right in stressing the importance of initial conditions. But his perspective, which chose to compare Asia, circa 1950 with Western Europe, circa 1750, had serious limitations. First, he failed to recognize that Asia became what it was, circa 1950, precisely because of what Europe did in Asia for two centuries. Second, it considered two different eras, separated in time, and two different continents, separated in space, without sufficient recognition that trajectories of development in Asia over the next fifty years might be different from, rather than similar to, patterns of development in Western Europe over the past 200 years. Third, he did not show any awareness that latecomers to industrialization, such as Russia and Japan, narrowed the gap in much shorter periods,22 which was a surprising blind spot in his vision of development. As it turned out, there was an economic transformation in Asia despite its relatively poor natural endowment of resources and climates. Population growth slowed down. There was a rapid growth in exports and an increase in private capital movements. Economic levels—incomes, savings and investments—rose much faster than might have been expected from history of the West. Institutions evolved even if this process was characterized by (p.23) considerable diversity rather than broad uniformity. Attitudes to work and life also witnessed change uneven though it was. The opportunities provided by modern technologies were exploited, as these were absorbed, adapted, or even developed, not only to foster industrialization but also to transform agriculture.

It is more appropriate to focus on initial conditions in Asia circa 1965, around the time that Gunnar Myrdal wrote Asian Drama, which could be considered in themselves, or in comparison with other parts of the world at the time. This is also more logical as most Asian countries were independent by 1965, which was not so in 1950. Table 1.5 presents a compilation of available evidence on initial conditions in Asia in terms of demographic, social, and economic indicators. This evidence is also disaggregated by its four constituent sub-regions: East, Southeast, South and West Asia.

Table 1.5 Selected indicators of initial conditions in Asia: 1965 and 1970

Asia

East Asia

Southeast Asia

South Asia

West Asia

DEMOGRAPHIC

1965

1965

1965

1965

1965

Population (millions)

1749

782

245

637

86

Density (per sq. km)

125

103

89

178

30

Birth rate (per 1000)

40

38

42

42

45

Fertility rate

(births per woman)

6

6

6

6

7

SOCIAL

1965

1965

1965

1965

1965

Life expectancy (years)

49

50

55

45

49

Literacy rate (per cent)

43

52

52

28

30

Literacy rate Male: Female (per cent)

51:33

58:47

63:42

40:15

42:19

Infant mortality rate (per 1000 live births)

160

196a

83

154

92

ECONOMIC

1970

1970

1970

1970

1970

Income

GDP (in current US$ billion)

276

114

24

85

54

as a percentage of world

8.1

3.3

0.7

2.5

1.6

GDP per capita (Current US$)

139

127

85

119

546

as a percentage of industrialized countries

4.7

4.3

2.9

4

18.4

Structure and Openness

Primary sector share in GDP

27

46

30

49

9

Manufacturing Value Added–GDP ratio (in percentages)

10

5

15

14

14

Merchandise Trade (Exports plus Imports)—GDP ratio

43

21

46

17

65

Investment

Gross capital formation as a percentage of GDP

21.6

30.7

24.2

20.2

16.9

Infrastructure

Electricity consumption per capita

(in kwh)b

647

1355

757

81

Road kms per 100 sq km of land area

25

67

8

30

20

Urban: Rural population

21:79

20:80

21:79

19:81

42:58

Notes:

(a) This figure in the column for 1965 relates to 1960.

(b) The figures in the columns for 1970 relate to 1980. Statistics for West Asia are not available.

Source: Author’s calculations based on several sources, see Appendix.

The evidence on demographic and social indicators relates to 1965. It shows that Asia was the most populous continent, home to more than half the people in the world. It was also the most land-scarce continent, with a population density of 117 persons per square kilometre. Its birth rate, at 40 per 1000, and fertility rate, at 6 births per woman, were very high. The social indicators show that life expectancy in Asia was just fifty years, while infant mortality rates were 159 per 1000 live births, reflecting the poor health status of people. Literacy rates at 43 per cent were low, and significantly lower in South Asia. There was also a strong gender bias, obvious from a comparison of male–female literacy rates. The picture in the sub-regions was broadly similar, except for Southeast Asia, which fared better. Sub-Saharan Africa apart, demographic and social indicators in Asia were the worst in the world.

The evidence on economic indicators relates to 1970 because it is the earliest year for which data are available. It shows that, in current prices at market exchange rates, Asia contributed just 8 per cent of world GDP (although it had 54 per cent of world population), of which East Asia and South Asia accounted for 3 per cent each, while Southeast Asia and West Asia accounted for 1 per cent each. GDP per capita in Asia was only 5 per cent of GDP per capita in industrialized countries. This proportion would have been even lower were it not for West Asia where GDP per capita in the oil producing countries was much higher. In the same year, 1970, GDP per capita in Latin America was more than four times that in Asia while GDP per capita in Africa was 60 per cent higher than that in Asia (Nayyar, 2013).

For Asia, in 1970, the primary sector—agriculture, forestry, animal husbandry—accounted for just over one-fourth of GDP.23 But four-fifths of the population lived in the rural sector. The share of manufacturing value added in GDP was one-tenth. However, the share of the industrial sector was larger because of mining, construction, and utilities. For Asia, merchandise exports plus merchandise imports, were the equivalent of about two-fifths of GDP. These proportions were lower at about one-fifth of GDP in East Asia and one-sixth of GDP in South Asia, but were significantly higher at close to one-half in Southeast Asia. Investment, gross capital formation, was just over one-fifth of GDP in Asia, with (p.24) some variation between regions. Although available evidence is incomplete, in 1960, in most Asian countries, gross domestic savings were in the range of 8–12 per cent of GDP while gross domestic investment was in the range 12–15 per cent of GDP. Infrastructure, reflected in electricity consumption per capita and roads relative to land area, was poor though it was distinctly better in East Asia as compared with other sub-regions.

(p.25) Clearly, circa 1965–1970, around fifty years ago, Asia was the poorest continent in the developing world. If the evidence presented in Table 1.5 was available for earlier years, say 1950, which it is not, it would show that underdevelopment in Asia was even more pronounced.

5. Shaping and reshaping of initial conditions

The initial conditions observed in Asian countries in the early post-colonial era, around 1950, were shaped mostly by the history embedded in their pasts. Of course, given the diversity of Asia, geography also mattered, since the size and location of a country exercised an influence on its past and its evolution. But the history, with its layers in time, is far more complex. There are centuries of history in Asia much before colonialism. But there is also a colonial history of at least 150 years. Both influences shaped the reality observed in the mid-twentieth century, even if the imprint of colonialism was more recent and more visible. There were two closely intertwined dimensions of the past before the European intrusion into Asia. Cultures, societies, and identities were one dimension, while economies were the other dimension. The influence of the colonial era differed across countries, as the legacies of different colonialisms—British, French, Dutch, American, and Japanese—were different.

Asian countries were characterized by a diversity attributable to their cultures, societies, and identities. There was a social stratification everywhere. There were religious, ethnic, and language divides. In South Asia, especially India, there were caste divides. In East Asia, particularly China, there was more cultural homogeneity, although there were minority identities and social divides. In Southeast Asia, there were religious divides (Buddhism and Islam) as well as ethnic diversity (with significant Chinese and Indian populations). Some divides were old, while some were new. Yet, given their long history, Asian countries were able to forge, or reclaim, national identities in their struggles for independence against colonial rulers, and strengthen these in the early post-colonial era. Most Asian countries did have a long history of well-structured states, and cultures, which were not entirely destroyed by colonialism. In this respect, Asia was very different from Latin America, or Africa, where colonialism had eroded indigenous cultures and identities.

There was also an economic dimension to initial conditions that was embedded in history, which was some sort of manufacturing experience from their past so that the origins of such experience differed across Asia (Amsden, 2001). For the two Asian giants, China and India, this experience was pre-capitalist, coming from artisans and craftsmen, and from an era when these countries were the main exporters of manufactures in the world. In some economies, such as Indonesia, Malaya, Taiwan, and Thailand, this experience originated in migrants, mostly from China but partly from India, while in Turkey it came from European (p.26) migrants (Nayyar, 2013). But colonialism was also a source of manufacturing experience, from the British in India and Malaya, from the Dutch in Indonesia, and from the Japanese in Manchuria (China), Korea, and Taiwan. This process was inevitably strengthened during the two World Wars when manufactured goods were not readily available from the usual sources.

Even so, it must be recognized that deindustrialization and underdevelopment in Asia were in large part a consequence of colonialism. Much of Asia was colonized. The solitary exception was Thailand. China was not colonized in a formal sense. It had a semblance of indigenous political rule with large foreign enclaves and spheres of influence (mostly British) to control the economy, which was in effect not very different from colonization. India, Ceylon, Burma, and Malaya (Malaysia and Singapore) were colonized by the British, Indonesia by the Dutch, Indochina (Vietnam, Cambodia, and Laos) by the French, Manchuria (Manchukuo in China), Korea, and Taiwan by the Japanese, and Philippines by the Spanish followed by the United States. There were essential similarities insofar as all the colonizers were exploitative in economics and authoritarian in politics, subordinating the colonies to serve their own economic and political interests. The models were also similar. The Europeans—British, Dutch, and French—followed their political conquests of countries in Asia with an acquisition of control over economies that existed, which were then integrated in subordinate roles with own their respective economies. But their legacies were somewhat different.

The limited concern here is how different legacies shaped initial conditions.24 The British opted for direct rule with relatively few expatriates to govern by creating new local elites and an intermediate class in their own image (replacing old feudal elites), for whom they created schools, colleges, or training facilities. Institutions—legal, administrative or economic—were established to help govern, using the axiom of divide and rule. Infrastructure was developed—hinterland to ports—to integrate economies of colonies with the economies of their colonial rulers. The spread of education or the development of infrastructure for ordinary people was simply not on the agenda. But the transfer of power, except in Malaya where it was delayed, was voluntary. In contrast, the Dutch and the French resisted parting with their colonies and were ultimately ousted through wars. The Dutch opted for indirect rule in Indonesia, through hereditary local leaders, to disturb traditional society as little as possible. But they did nothing to curb the power and greed of Dutch people or firms who dominated the colonial economy, or to eliminate discrimination against the local population in government and business. Yet, the Dutch believed that they would rule forever. The French in Indochina also did not think that their colonies would ever be separated from France, while their subjects could even dream of becoming French citizens. French colonialism was ostensibly on a civilizing mission to spread their culture, ideas, and language among indigenous peoples in Asia. Yet, local people were treated as second-class citizens in their own countries, excluded from the modern sector of (p.27) the economy and from government (except at subordinate levels), which were for the French alone. In addition, French settlers from the lower ranks of their army and of peasant origins, acquired large amounts of land, while internal trade and commerce was run by local Chinese. During 1898–1946, Philippines was a colony of the United States, which sought to create a democracy in its own image, but without disturbing the essentially Spanish colonial legacy of local landed elites that had evolved over three centuries. For that reason, perhaps, Philippines in Asia resembles the erstwhile Spanish colonies in Latin America.

The Japanese were latecomers to industrialization and imperialism. Taiwan and Korea became colonies in 1895 and 1910 respectively, while Manchuria was formally colonized starting 1928. But Japanese colonialism was different from European colonialism in Asia, even though its authoritarian and repressive nature is etched in memories. Its military and police presence was much greater. So was the presence of Japanese civilians.25 But there were substantial investments in manufacturing and infrastructure. In Manchuria, manufacturing more than quadrupled between 1929 and 1941 and, by 1945, it was producing half of the total manufacturing output in China (Maddison, 2007, p. 153). And there was an emphasis on education. By 1940, 50 per cent of schoolchildren in Korea and Taiwan received elementary education, compared with 2 per cent in Vietnam at the time (Duara, 2019).26 These attributes were an important part of initial conditions, which had significant implications for development in the post-colonial era in Korea, Taiwan, and China.

The conjuncture in time also influenced initial conditions in post-colonial Asia. Land reforms were carried out in Korea after the Second World War, under the supervision of the United States occupation forces, and in Taiwan, soon after 1950, once again under the supervision of the United States, after the Nationalist Kuomintang government fled there from China. Following the revolution, in 1950, the Chinese Communist Party led by Mao Zedong carried out land reforms in China. Similarly, the Communist Party in Vietnam led by Ho Chi Minh started land reforms in 1945, which were completed after the French were forced to leave in 1954. During the early 1950s, the geopolitics of the Cold War also reshaped initial conditions in the so-called front-line states, especially Korea and Taiwan, which received massive economic assistance, plus a preferential access to its market, from the United States. Some time later, during the Vietnam War, such support was extended to some Southeast Asian countries, particularly Thailand and, to some extent, Philippines. On the other side of this Cold War divide, the USSR provided economic and military support, but governments in China and Vietnam were also conscious of their geopolitical vulnerabilities, which motivated them to address problems embedded in their legacy of initial conditions. It is clear that the conjuncture, in the national or international context, also reshaped initial conditions in some Asian countries, which in turn shaped trajectories of development for these countries in subsequent decades.

(p.28)

Notes:

(1.) For a discussion, see Myrdal (1968, volume I, chapter 4, pp. 129–74).

(2.) For an even longer-term perspective, spanning several millennia, on human history in the context of the world economy, see Morris (2010).

(3.) See Maddison (1995, 2001, and 2003).

(4.) Maddison adopts the Geary–Khamis approach, which is appropriate for comparisons across a large number of countries over long periods of time. The method is ‘multilateral’ rather than ‘binary’ and it assigns a weight to countries corresponding to the size of their GDP, which makes comparisons transitive and imparts other desirable properties. This approach was also adopted by Kravis, Heston, and Summers (1978). The Maddison exercise uses 1990 as the benchmark year to provide the inter-spatial and inter-temporal anchor for GDP estimates. Thus, the numeraire is termed ‘1990 international Geary–Khamis dollars’. For a more detailed discussion, see Maddison (2003).

(5.) See, for example, Clark (2009).

(6.) In this context, it is worth noting that the sharp decline in the share of Asia in world GDP, which was attributable mostly to China and India, was relative rather than absolute. It was a consequence of stagnation or much slower growth compared with the rest of the world. See Table 1.3.

(7.) This was possibly attributable to the end of colonialism in Latin America, where independence came to most countries in the early nineteenth century, which may have facilitated the adoption of policies that enabled them to perform better than Asia. For a lucid analysis of economic development in Latin America since independence, see Bertola and Ocampo (2012).

(8.) For a more detailed discussion of the debate on this issue, see Nayyar (2013).

(9.) Such a comparison, with supporting evidence, is made by Pomeranz (2000), Findlay and O’Rourke (2007), and Parthasarathi (2011).

(10.) The large ‘white-settler’ population in many African colonies meant that the living standards of natives were even lower than what the GDP per capita suggests.

(11.) See Williamson (2002), Nayyar (2006), and Williamson (2006).

(12.) For evidence on tariff rates, see Bairoch (1993) and Maddison (1989).

(13.) Evidence on the size and composition of trade between Europe and Asia, Africa, or Latin America during this era is limited and sparse. See Nayyar (2013, pp. 27–8).

(14.) While mines were dependent on natural resource endowments, crops from elsewhere were brought to plantations in colonies, for example, tea in India, rubber in Malaya, coffee in Indonesia, sugar in the Caribbean, and so on.

(p.246) (15.) These proportions have been calculated from Bairoch (1982, table 10, p. 296 and table 13, p. 304).

(16.) These ratios are calculated from Bairoch (1982, p. 294 and p. 302), who estimates per capita industrialization levels for country-groups and countries, based on triennial averages, as index numbers with the UK in 1900 as 100.

(17.) For an analysis of the Industrial Revolution in Britain, see Allen (2009).

(18.) For an analysis of this set of issues, see Bairoch (1981), Pomeranz (2000), Nayyar (2006), Williamson (2006), Findlay and O’Rourke (2007), Maddison (2007), Parthasarathi (2011), and Nayyar (2013).

(19.) For Japan, this was so only until 1911. But Japan imposed an unequal treaty on Korea in 1876, even when it was subject to unequal treaties with the West.

(20.) The idea of cumulative causation and vicious circles created by negative feedback effects is developed at some length by Myrdal (1968, volume III, appendix 2, pp. 1843–78). In such situations, the challenge of development is to transform this process of cumulative causation into virtuous circles through positive feedbacks and spread effects.

(21.) Myrdal (1968) devoted a whole chapter to this discussion on differences in initial conditions (volume I, chapter 14, pp. 673–405).

(22.) This what Veblen (1915) described as ‘penalty of taking the lead’ and what Gerschenkron (1962) described as ‘advantages of relative economic backwardness’. For a more detailed discussion, see Chapter 7. See also Nayyar (2013).

(23.) This figure understates the relative importance of the primary sector in Asia. It was attributable to West Asia where the share of the primary sector in GDP was only 9 per cent but the sub-region accounted for 44 per cent of Asia’s GDP in 1970. For East Asia, Southeast Asia and South Asia, taken together, the share of the primary sector in GDP was much higher at 42 per cent.

(24.) For a detailed discussion on how European colonialisms differed from each other, in Asian countries, see Myrdal (1968, volume I, chapter 4, pp. 129–74) and Maddison (2007, chapter 3, pp. 111–82).

(25.) In 1945, there were more than 1 million Japanese civilians in Manchuria (Maddison, 2007, p. 153). In sharp contrast, in 1805, there were only 31,000 British people in India, of whom 22,000 were in the army and 2,000 in civilian government. In 1931, there were 168,000, of whom 60,000 were in the army and police, 4,000 in civilian government, and 26,000 in the private sector, while 78,000 were family dependents (Maddison, 2007, p. 119).

(26.) In India in 1951, three years after independence, the literacy rate was just 18 per cent of the population (Nayyar, 2006a).