Thursday, 30 May 2013

Economic production under communism

In this post I plot the change in GDP per capita (PPP) between 1950-2010 in a number of communist countries (namely, the former USSR, Cuba, Cambodia, China and North Korea). In each case, I compare the change to the corresponding change in one or two neighbouring (or otherwise similar) countries that had more liberal economic arrangements over the time-period in question. Unsurprisingly perhaps, by 2010 the cumulative differences in per-capita production between the communist and non-communist countries are huge. The data (which I will briefly discuss at the end) are from the Maddison Project. All of the communist countries I consider underwent major social conflict between 1950-2010, so it is not clear how much of their lack of increase in production is due to communism, as opposed to social conflict. However, some people would argue that social conflict is inherent to communism, meaning that it does not make sense to speak of the effect of communism on production absent of social conflict.

I should also add that I am certainly not an expert on any of the countries' histories or current affairs. My understanding is that Cambodia is no longer a communist country and that, whilst China is nominally communist, it has undergone substantial liberalisation since the late 1970s. Another caveat is that, in a couple of the cases, selection of the comparison country or countries was somewhat arbitrary.

An important issue is that of data-quality. One possibililty is that the Maddison data are too noisy to be of much use. As a rudimentary check for this, I plot--for the year 1990--the Maddison estimates against the World Bank estimates for all those countries that had an observation in both data-sets (except the UAE). As the chart below indicates, the relationship between the two variables is strong. In addition, Maddison did not systematically over- or underestimate countries' per-capita productions.

A second possibility is that Maddison happened to overestimate the per-capita productions of the liberal countries I selected, and happened to underestimate the per-capita productions of the communist countries. As a rudimentary check for this, I plot the difference between the two estimates for all those countries that had an observation in both data-sets. As the chart below reveals, compared to the World Bank's analysis, Maddison overestimated the per-capita production of South Korea and Thailand, as well as China. However, these disparities are not large enough to account for the smaller increase in per-capita production under communism in the relevant cases. I obviously cannot rule out the possibility that Maddison completely misestimated the per-capita productions of the USSR, Cuba, Cambodia and North Korea.

1 comment:

  1. what would the graphs look like if you nominalised all countries' GDP/capita at 100 at the start, so you examine the relative change during the last 60 years?