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Prolific IQ researcher Richard Lynn together with two Russian collaborators have recently published arguing that multiple aspects of socio-economic development – infant mortality, fertility, stature, and literacy-as-a-proxy for intelligence were significantly intercorrelated in late Tsarist Russia.

russian-empire-literacy-rate-1897

Literate rate of the European part of the Russian Empire in 1897.

Here is the link to the paper – Regional differences in intelligence, infant mortality, stature and fertility in European Russia in the late nineteenth century

And here is a summary by James Thompson – 50 Russian oblasts.

To the right: Here’s your map, JayMan. You’re welcome.

The main potential sticking point:

There are no data for regional intelligence in the nineteenth century and we have therefore adopted rates of literacy as a proxy for intelligence. This is justified on the grounds that a high correlation between literacy rates and intelligence have been reported in a number of studies. For example, a correlation of .861 between literacy rates for Italian regions in 1880 and early twenty-first century IQs has been reported by Lynn (2010); a correlation of .83 between literacy rates for Spanish regions in the early twenty-first century has been reported by Lynn (2010); (Lynn, 2012); and a correlation of 0.56 between literacy rates and IQs for the states and union territories of India in 2011 has been reported by Lynn and Yadav (2015). There is additional support for using literacy in the nineteenth century as a proxy for intelligence in the results of a study by Grigoriev, Lapteva and Ushakov (Григорьев, Лаптева, Ушаков, 2015) showing a correlation of .58 between literacy rates of the peasant populations of the districts (uezds) of the Moscow province in 1883 and the results of the Unified State Exam and State Certification on Russian Language in the districts of the contemporary Moscow oblast.

The methodology at first struck me as being rather problematic.

I’ve read a bit about Russian state literacy programs in the 19th century (National Literacy Campaigns and Movements) and one of their main features is that they tended to spread out from the central European Russian provinces due to cost effectiveness reasons, hence the low literacy rates of e.g. Siberia in Lynn’s data set. However, there is no particular evidence that Siberian Russians are any duller than average Russians. To the contrary, some 3% of Siberian schoolchildren become “Olympians” – high performers who qualify for highly subsidized higher education. This proportion is lower than the 15% of the central region (which hosts Moscow, Russia’s main cognitive cluster with a 107 average IQ), and the 14% of the north-west region (which hosts Russia’s second cognitive cluster with a 103 average IQ Saint-Petersburg, plus the Russians there are probably slightly brighter in general on account of Finno-Ugric admixture), but is considerably higher than in any other Russian Federal District: The Urals and Volga (both about 2%), and the Far Eastern, Southern, and Caucasus (all considerably below 1%).

In other words, would such a historical literacy – modern intelligence correlation apply to Russia as it does to Italy, Spain, and to a lesser extent, India?

russia-pisa-results-2009-math-science-2

Average 2009 PISA results by Russian region.

Fortunately, we don’t have to postulate, since we do actually have PISA data for many Russian provinces that I revealed back in 2012.

This allows us to test if Lynn’s assumptions apply.

There are difficulties, to be sure. Not all Russian provinces were tested in PISA, and there is, needless to say, no data for any of the Ukrainian and Polish oblasts, or for Belarus. As such, only 20 Russian provinces could be tested in this manner (26 if you also include now independent countries excluding Russia itself).

In some cases, names have changed, typically to honor some faceless Soviet bureaucrat; in more problematic cases, borders have changed significantly (e.g. the five provinces of Estonia, Livonia, Courland, Kovno, and Vilna have become the three countries of Estonia, Latvia, and Lithuania – I have tried to average the literacy figures between them in a common sense but back of the envelope way). The Moscow Governorate has been split into the City of Moscow (with its 107 average IQ) and Moscow oblast (with a modest 96 average IQ). Which of those should be attached to Moscow’s 1897 literacy rate of 40%? (As it happens, I went with just the City of Moscow instead of figuring out how to weigh the populations and adjust and so forth. I’m not trying to writea formal paper, after all).

russia-tsarist-literacy-and-current-iq

There is an exponential correlation of R=0.75 between average PISA derived IQs of Russian regions and of now independent countries, and their literacy rate according to the 1897 Census. Therefore, this bears out Lynn’s assumptions.

The two downwards outliers – more relatively intelligent than literate – are Moscow, Tatarstan, Tula, Samara, and Tambov. Moscow is easily explainable – the city itself in Tsarist times would have been more literate than the Moscow Governorate, while its average IQ was artificially boosted in Soviet times since it became not just the empire’s political but also its cognitive (artistic, scientific) capital. Getting a Moscow propiska required considerable intelligence.

The three very major upwards outliers – more relatively literate than intelligent – are the Finno-Ugric Baltic states: Finland, Estonia, and Latvia. This can’t have been a non-Orthodox/Muslim thing: Both Poland (On-The-Vistula Governorate) and Lithuania (Kovno and Vilna) lie neatly on the correlation curve. Nor was it something Finno-Ugric; Karelia (then Olonets) is not an exception either. It must have been something specific just to them and the most obvious explanation is Protestantism. There is a lot of literature on the independent literacy-raising effects of Protestantism and I see no reasons why Estonia, Latvia, and Finland should have been exceptions to that.

Another outlier, though this one is at the bottom of the IQ scale, is Moldova. To be fair I think Moldova’s PISA-derived IQ is artificially lowered by a third to half of an S.D. due to the massive brain drain it has experienced after the collapse of the Soviet Union (something like half the working age population are Gastarbeiters in the EU and Russia). We see similar drops in other countries so afflicted, such as (possibly) Puerto Rico, and (almost certainly) Ireland during most of the 20th century, when it repeatedly reported IQs in the ~90 range (and ironically one of the reasons Richard Lynn himself abandoned it to move to Northern Ireland, thus getting stuck in the most depressed region of the UK and missing out on the rise of the Celtic Tiger a few years later).

russia-tsarist-literacy-and-modern-iq-RF-only

The correlation improves further to R=0.80 when we consider only those Tsarist-era provinces which are still part of the Russian Federation. This is accomplished (more than) entirely just by removing the Protestant Baltic nations (Finland, Estonia, and Latvia) and Moldova (whose current day average IQ is depressed due to massive brain drain as per above).

As usual Lynn does his north/south IQ gradient analysis, finding it to be a real thing but diminishing to nothing once the Baltic states of Estonia, Livonia, and Courland are accounted for.

Quoting from Thompson’s summary:

The Russian provinces differed significantly by geographical location. The positive correlations with latitude (r= .33, p<.05) and the negative correlation with longitude (r=−.43, p<.01) show that the rates of literacy were higher in the northand west than in the south and east. These trends were partly determined by the rates of literacy being highest in the north-western provinces of St. Petersburg and the three Baltic states of Estland, Livland and Kourland (correspondingapproximately but not precisely to contemporary Estonia and Latvia; Livland consisted of southern part of contemporary Estonia and eastern part of contemporary Latvia). Removing these four regions makes both correlations non-significant (.21 and −.23).

pale-of-settlement-1897

The Pale of Settlement in 1897.

One additional issue worth bearing in mind: The influence of the Jews. Namely, their concentration in the Pale of Settlement, which correlates to modern day Poland, Belarus, and right-bank Ukraine (west of the Dnieper). There were more than 5.2 million Jews, and their literacy rates were very high (according to the 1926 Soviet Census, Jews over the age of 50 – i.e., who had been educated under the Empire – had a literacy rate of 63% versus 28% for ethnic Russians).

This must have “artificially” raised the literacy rates in this area – as pertains to those regions’ 21st century average IQs, anyway, since the vast majority of those Jews are no longer there due to the trifecta of the Holocaust, Jackson-Vanik, and Aliyah. The effect would probably be to reduce the “indigenous” literacy rates in Lithuania and Poland closer to those of European Russia, while pushing the already low literacy rates of strongly ethnic Malorossiyan and Belorussian provinces considerably lower still. Not a single province of modern Ukraine outside historical Novorossiya (with its strong Great Russian admixture) had a literacy rate above 20% in 1897, despite highly literate Jews helping them out with the statistics.

Unfortunately, there is a severe paucity of usable psychometric data from Ukraine – for instance, it is one of the very few European countries that doesn’t participate in PISA. So its average IQ has to be estimated through generally more indirect means. It does the converted equivalent of 9 IQ points worse than Russia on the TIMSS standardized test. Ukrainians spend less than half as much time as Russians reading, and those from the western parts at least spend a lot more time participating in torchlit processions and chanting “Putin Khuylo.” Some of those activities are considerably more g loaded than others. The low literacy rates in late Tsarist Malorossiya, coupled with the finding of a close correlation between those literacy rates and modern day average IQ across both Russian provinces and today’s independent post-Soviet states, constitutes further evidence of a modest average IQ in Ukraine. Higher than in Moldova to be sure, but probably closer to the level of the Balkans than to Poland.

Data

Sources: Grigoriev, Lapteva, and Lynn 2015; Karlin 2012 (derived from PISA 2009).

IQ Literacy in 1897
Astrakhan 94.8 15.5%
Bashkortostan 93.4 16.7%
ESTONIA 102.1 77.9%
FINLAND 106.6 75.6%
Kaluga 91.7 19.4%
Karelia 98.1 25.3%
Kursk 94.6 16.3%
LATVIA 98.0 74.3%
LITHUANIA 99.0 35.4%
MOLDOVA 84.9 15.6%
Moscow 106.6 40.2%
N. Novgorod 93.1 22.0%
Orenburg 92.7 20.4%
Perm 93.3 19.2%
POLAND 100.2 30.5%
RUSSIA 96.0 21.1%
Ryazan 94.7 20.3%
Saint-Petersburg 102.6 51.5%
Samara 99.2 22.1%
Saratov 96.0 23.8%
Tambov 95.9 16.6%
Tatarstan 98.1 17.9%
Tula 98.6 20.7%
Ulyanovsk 91.5 15.6%
Vladimir 98.9 27.0%
Vologda 95.3 19.1%
Voronezh 92.7 16.3%

Literacy and Social Development in 1890s Russia (from Grigoriev et al. 2015)

Incidentally, I am not surprised to see Yaroslavl being the top non-Baltic/non-capital Russian region by literacy rate in 1897. It struck me as by far the cleanest and most civilized provincial Russian town on the Golden Ring when I visited it in 2002 (a time when Russia was still shaking off the hangover of the Soviet collapse). Curiously enough, it also hosted one of the most vigorous insurrections against the Bolshevik regime in central Russia. Although it was not one of the regions covered by PISA, I would not be surprised if Yaroslavl oblast was to get a 100-102 score on it should it be carried out there (and as would be implied by the correlation curve).

lynn-table-imperial-russia-literacy

 
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According to a recent n=150,000 global survey by Gallup and S&P, there is an astounding lack of financial literacy in the world.

To gauge financial literacy, they asked a series of four questions on basic financial concepts such as risk diversification, inflation, simple interest, and compound interest. They were very simple and typically only had 2-3 possible answers. Here is the most “difficult” question:

Suppose you had 100 US dollars in a savings account and the bank adds 10 percent per year to the account. How much money would you have in the account after five years if you did not remove any money from the account?

The possible answers were:

[more than 150 dollars; exactly 150 dollars; less than 150 dollars; don’t know;
refused to answer]

Demonstrating understanding in three out of the four areas qualified you as financially literate. Only a third of the world’s population reached that threshold, rising to a modest 53% in the advanced OECD countries.

global-financial-literacy-world-map

One surprising pattern is that there was very little variation in financial literacy between low-income and middle-income countries; there was only a sustained increase once countries began to exceed the $12,000 GDP per capita mark. Presumably, that is approximately the point when people start doing things like getting credit cards and taking out mortgages, so they are forced to come to grips with concepts like compound interest whether they like it or not. But there are plenty of both negative outliers (e.g. Japan, Korea, Italy, Portugal), as well as a few positive ones (e.g. Bhutan, Myanmar, Botswana).

economic-development-and-financial-literacy

Curiously, the correlation between financial literacy and cognitive ability appears to be surprisingly low. In other words, basic financial literacy has a low g loading.

There is a relationship to be sure, but exceptions abound, even in the rich country list. High IQ Japan, Korea, and China do a lot worse than one might expect. Botswana and South Africa do much better than what their national IQ levels might imply; in fact, South Africa is the highest-scoring of the BRICS countries.

g7-vs-brics-financial-literacy

Although conventional coverage of the national differences in financial literacy highlighted in this report by mainstream journalists like Leonid Bershidsky predictably focus on things like education levels and exposure to financial services, the really big explanatatory factor seems to be religious/cultural.

On the global scale, the Protestant world comprise nine of the world’s top 10 most financially literate countries, and an amazing 17 of the world’s top 25 – which is also a convenient threshold representing 50%+ financial literacy. (By which point the stock of both developed world Protestant countries pretty much ends). The world’s offshore bank, Switzerland, is a relatively disappointing 15th.

9 of the top 10 countries are within the Hajnal line of Europe, or are their descendants; and 17 of the top 25.

Predictably, the non-Protestant exception in the top 10 is Israel. The Jews can sure count their shekels.

Another correlation that seems to exist is with time preference. Countries where people displayed a willingness to wait to get a greater sum of money in one month’s time, as opposed to getting a smaller sum right now (inflation-adjusted), also tended to perform much better on financial literacy metrics.

The Catholics and Orthodox Christians tended to do a lot worse, even though as we know IQ differences between them and the Protestant world are fairly minor. Likewise with the Confucian civilization.

This suggests that Protestant populations have tended to culturally evolve (or gene-culturally evolve) an “intuitive” understanding of finance like things, while the rest of the world pretty much has to figure it out from zero. More intelligent populations with financial experience, such as the Japanese, tend to be relatively better at it (43% financially literate); less intelligent populations without much financial experience, such as the Indians and Iranians, do much worse at it (<25% financially literate).

Still, there remain some curious cases nonetheless. How does dirt poor and only 60% literate Bhutan manage to take 20th place, with 54% financial literacy? Myanmar also does surprisingly well for a country of its socio-economic and hisorical profile, taking up the 24th slot. Both are Buddhist, but otherwise, Buddhists do not appear to perform especially well; Cambodia is one of the worst, while Thailand is middling between Myanmar and Cambodia. Nor does it appear to have anything to do with the particular sect of Buddhism: Bhutan follows Vajrayana Buddhism, while Myanmar follows Theravada.

Financial Literacy 2015 via S&P/Gallup

# Country % Financial Literacy
1 Norway 71.3%
2 Denmark 71.3%
3 Sweden 71.2%
4 Israel 68.4%
5 Canada 68.3%
6 United Kingdom 67.1%
7 Netherlands 66.1%
8 Germany 65.7%
9 Australia 63.7%
10 Finland 62.9%
11 New Zealand 61.5%
12 Singapore 59.4%
13 Czech Republic 58.4%
14 United States 57.4%
15 Switzerland 57.1%
16 Belgium 55.3%
17 Ireland 55.1%
18 Estonia 54.4%
19 Hungary 54.2%
20 Bhutan 53.7%
21 Luxembourg 53.2%
22 Austria 53.0%
23 Botswana 52.2%
24 Myanmar 51.8%
25 France 51.7%
26 Spain 49.1%
27 Latvia 48.3%
28 Montenegro 48.2%
29 Slovak Republic 48.1%
30 Greece 45.0%
31 Uruguay 44.8%
32 Tunisia 44.7%
33 Lebanon 44.4%
34 Malta 44.2%
35 Croatia 44.1%
36 Slovenia 44.0%
37 Kuwait 43.5%
38 Japan 43.0%
39 Hong Kong SAR, China 42.7%
40 Poland 42.4%
41 South Africa 41.7%
42 Turkmenistan 41.1%
43 Mongolia 40.7%
44 Chile 40.7%
45 Zimbabwe 40.6%
46 Zambia 40.4%
47 Tanzania 40.3%
48 Ukraine 40.0%
49 Kazakhstan 39.7%
50 Senegal 39.7%
51 Bahrain 39.5%
52 Lithuania 38.7%
53 Mauritius 38.7%
54 United Arab Emirates 38.3%
55 Russian Federation 38.1%
56 Kenya 38.0%
57 Serbia 38.0%
58 Togo 38.0%
59 Madagascar 37.7%
60 Cameroon 37.7%
61 Belarus 37.5%
62 Benin 37.0%
63 Italy 36.9%
64 Taiwan, China 36.9%
65 Azerbaijan 36.3%
66 Malaysia 35.7%
67 Sri Lanka 35.4%
68 Dominican Republic 35.4%
69 Costa Rica 35.1%
70 Malawi 35.1%
71 Gabon 34.8%
72 Bulgaria 34.7%
73 Côte d’Ivoire 34.7%
74 Brazil 34.7%
75 Cyprus 34.6%
76 Uganda 34.2%
77 Korea, Rep. 33.4%
78 Mali 33.4%
79 Mauritania 33.3%
80 Algeria 33.0%
81 Jamaica 32.9%
82 Burkina Faso 32.8%
83 Belize 32.6%
84 Colombia 32.2%
85 Indonesia 32.2%
86 Puerto Rico 32.2%
87 Ethiopia 32.1%
88 Congo, Dem. Rep. 31.9%
89 Mexico 31.6%
90 Ghana 31.5%
91 Niger 31.5%
92 Saudi Arabia 31.3%
93 Congo, Rep. 31.0%
94 Guinea 30.4%
95 Ecuador 30.3%
96 Georgia 29.7%
97 China 28.1%
98 China 28.1%
99 Argentina 28.0%
100 Peru 27.6%
101 Egypt, Arab Rep. 27.5%
102 Thailand 27.4%
103 Moldova 27.4%
104 Bosnia and Herzegovina 27.2%
105 Iraq 27.2%
106 Namibia 26.7%
107 Panama 26.5%
108 Pakistan 26.3%
109 Chad 26.2%
110 Nigeria 26.1%
111 Portugal 26.0%
112 Rwanda 25.8%
113 Guatemala 25.7%
114 Venezuela, RB 25.1%
115 Philippines 25.0%
116 West Bank and Gaza 24.6%
117 Burundi 24.4%
118 Vietnam 24.4%
119 Bolivia 24.4%
120 Turkey 23.6%
121 India 23.6%
122 Jordan 23.6%
123 Honduras 22.9%
124 Romania 21.7%
125 Macedonia, FYR 21.5%
126 Uzbekistan 21.4%
127 El Salvador 21.1%
128 Sierra Leone 21.0%
129 Sudan 20.7%
130 Iran, Islamic Rep. 20.5%
131 Kosovo 19.9%
132 Nicaragua 19.8%
133 Bangladesh 19.2%
134 Kyrgyz Republic 18.9%
135 Cambodia 18.4%
136 Nepal 18.3%
137 Armenia 18.2%
138 Haiti 17.9%
139 Tajikistan 16.9%
140 Angola 15.3%
141 Somalia 15.2%
142 Afghanistan 14.1%
143 Albania 13.8%
144 Yemen, Rep. 13.3%
 
• Category: Economics • Tags: Culture, Finance, Literacy, Protestantism 
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scylla-charybdis-and-me Contrary to what some might try to take from my post on the longterm failure of the Soviet economy, I am not an anti-Soviet ideologue. I loathe lies about its achievements and the blanket condemnations directed its way by moralistic poseurs every bit as much or more than I detest reality-challenged attempts to paint it off as some kind of utopia or at least superior to alternative paths of development.

After communists, most of all I hate anti-communists. – Sergei Dovlatov, Soviet dissident.

On the latter point, I especially notice a tendency to ignore wider historical and comparative context. In the crudest cases, Russian literacy rates and GDP are compared with those of the Tsarist era: Yes, of course the average Soviet citizen c.1980 lived far better than the average Russian citizen in 1913, but then again, so did the average citizen of EVERY OTHER European country. The more important question to ask: Would the average Russian have been better off had the Russian Empire continued on its natural development trajectory without the distortions of Stalinist central planning? Yes, he almost certainly would have, as per comparison with, say, Finland (the sole part of the Empire that didn’t go Communist), or even the Mediterranean periphery nations.

Alternatively, they say that the USSR nonetheless managed to be richer than the “Third World”, as if that was some kind of achievement. Of course it was not, as (1) they were much less advanced than the Russian Empire even in 1913, and (2) their low national IQ’s would have precluded, and continue to do so, convergence with the rich world anyway; a weakness that Russia *doesn’t* suffer from. But the evidence is simply too overwhelming to be deniable: China; North Korea; Cuba; to a lesser extent, the ex-Soviet countries and Eastern Europe – all these nations, which have little in common except insofar as they suffered from the scourge of Communist economics, are ALL glaring and consistent downwards exceptions to the otherwise remarkably tight correlation between levels of national IQ/human capital and GDP per capita. (Of course a further problem here is that hardcore Soviet apologists tend to be cultural Marxists and deny Human Biodiversity and intelligence theory).

They plead special circumstances, e.g. that the USSR was encircled, and it suffered from wars, crises, etc. But the USSR was far from alone from being wracked by catastrophe during the 20th century – in fact, quite a few of them were self-inflicted, like the Stalinist famines – and (to its credit), it remained stable and recovered quickly from shocks, unlike many developing capitalist countries. (E.g., lost WW2 industrial output was restored by the late 1940′s). As for the sums it spent on the military, this was a reason but not the main reason why the Soviet economy became sluggish and living standards stagnated from the 1970′s, at a level that was far beneath that of the advanced world (regardless of whatever absurd anecdotes commentators like Kirill or Leon wish to recount).

That said, I equally despise ideologized LIES about the USSR, which tend to come most prominently from Russophobe Westerners and their liberal compradors in Russia: That it shares responsibility for WW2 with Nazi Germany; that it “drowned” the fascist invaders with bodies (there is a whole host of myths on that front, most of which were initially advanced by retired Nazi generals); that the Holodomor was a genocide against Ukrainians (it was a manmade famine enabled by ideological zeal, and remarkably comparable to the Irish Famine); that the Soviet space program was run by German scientists; that the Soviet system was doomed to collapse; that the Communists killed 70 million people (in reality about 2mn executed or died in camps, and a further 5mn in manmade famines – which is STILL horrible, lest critics accuse me of apologetics, especially when one considers that the most severe late Tsarist era famine happened in 1891, in which half a million people died).

I also consider Andropov to have been the best of the Soviet leaders, and am of the opinion that on balance it would have been better had the USSR not collapsed and instead reformed itself while maintaining political unity (though in practice, again contrary to pro-Soviet propaganda, this was a very hard if not impossible task in the conditions that had developed by the late 1980′s). Despite not having really lived there I very much REGRET the Soviet collapse; for a start, I would not have become a rootless cosmopolitan slouching about foreign countries, and more generally the new democratic and “independent” Russia would not have been pushed about and bullied by the West, which contrary to its democracy propaganda only truly respects the fist. If I were really the anti-Soviet ideologue some people insist on painting me as, would I have made SEVEN out of the 50 (14%) of my article on Russophobe myths directly tied to clearing up misconceptions about Soviet history? Would I have translated the controversial textbook by Filippov, which was smeared as Stalinist by various liberal ideologues and Russophobes?

Of course, there are also polarly opposite ideologues who consider me a Stalinist or Soviet apologist, such as La Russophobe and Economist “journalist” Edward Lucas and his various Balto-fascist minions. They hardly deserve mention. After all if I was this sovok diehard would I bother doing stuff like translating this article which is largely anti-Soviet by Estonian writer Jaan Kaplinski?

My only real sin is being objective, radically ambiguous, not taking sides, etc., and for this I come under assault from everybody – the liberals, the PC brigade and cultural Marxists, the traitors and compradors, the Russophobes Western and Russian, Western chauvinists, the hardcore Stalinists, the Communists, the monarchists and white nationalists, and what’s worst in my view, the Russian “patriots” who think Stalin and/or the USSR in general were the best thing since vodka. That is because many of the above are actually viciously intolerant fascists if not in name then in spirit. Those thugs will never shut me up!

Nonetheless, for all the lively discussion the recent post on the Soviet economy generated, I have taken the strategic decision to henceforth place all my commentary on Russia that is not more or less directly involved with this blog’s sub-header – “Exposing Western myths about Russia” – at my other blog AKarlin. That blog will be for controversial, original, etc. comment on Russia that will at times not jive well with DR’s theme. This blog will be exclusively about specific Russia myths, exposes of lying journalists, Russia-related translations, telling statistical charts, etc.

EDIT Jan 29, 2013: I have moved taken the above paragraph to heart and transferred the post from DR to AKarlin, where you are now reading it.

(Republished from Da Russophile by permission of author or representative)
 
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Many Communists, leftists, and even patriots (I’m sorry to say) have a pronounced tendency to make out the Soviet economy as not quite the resounding failure it really was – or even to paint it as a success story that was only brought down by perestroika and liberal reforms.

The above chart – based on historical GDP per capita (Geary-Khamis 1990 Int$) by Angus Maddison, compiled by liberal economist Illarionov, popularized online by Lopatnikov, and Starikov – purports to destroy two “myths”: That of (1) Prosperous Tsarism, and (2) The ineffectiveness of the Soviet economy. After all, the average Russian went from being 40% as rich as the average American in 1885, to only 23% by 1917; whereas during the Soviet period, despite the turmoil of two major wars, Russian incomes reaches a relative peak at 40% of American levels during Brezhnev’s “stagnation” period.

These is however a glaring hole in this logic, namely that (1) relatively slow growth under late Tsarism reflected a permanent state of affairs, as opposed to the heavy but temporary burden of a large rural, illiterate population; and (2) that a level of per capita GDP that is a mere 40% of what Americans enjoy was in any way a fulfillment of Russia’s potential during the 20th century. In fact, graphical comparison with other countries shows this to be almost certainly false.

I replicated the graph comparing Russia’s historical performance relative to the US, but adding in another reference – those south European countries that were broadly comparable to Tsarist Russia in terms of economic development at the turn of the century (i.e. both were backward), but were spared from the distortions of central planning. (I could only find figures for the Russian Empire/the USSR as a whole, not Russia specifically, hence the slight disparity from the first graph; but the trends would remain the same). You can click on the graph to view it in higher detail.

On examination, several things became clear:

(1) While it is true that Russia was losing ground relative to the US under late Tsarism, or at least until 1905 (see first graph) – the same was true for all other backward European economies. In fact, the Russian Empire tracked Portugal almost exactly. But bear in mind that Russia in 1870 was 90% rural and illiterate, a state of affairs utterly nonconductive to industrial development; and agriculture’s potential for productivity gains is extremely limited, especially in the context of the system at that time. In contrast, the US was almost universally literate and embarking on its great industrial boom. It is no wonder then that the relative gap between the US and Russia increased from 1870 to 1905 (why the gap existed in the first place can be traced back centuries and is far beyond the scope of this post). Notice that the same thing was happening in all the other similarly backward countries: Portugal, Spain, Ireland, to a lesser extent (but more developed) Italy also all lost ground to the US from 1870-1913.

(2) The Soviets inherited Tsarist infrastructure, hence the period until 1925 was simply one of restoration. It should also be noted that the literacy rate by 1916 was around 50%, i.e. in terms of human capital development, much of the legwork had already been done; that is, the country was ALREADY ripe for a faster rate of industrialization, that would have happened regardless under any political regime. Nonetheless growth began to flag by the late 1920′s, as Tsarist-era production levels were restored. It was only further turbocharged from 1930 on by forced savings via collectivization and consumption repression, and German and American investment. But even so note that the sharp rise in the early 1930′s was in large part an artifact of the Great Depression that wracked the US, and that in that period ALL countries rose upwards, and that the USSR failed to make substantial gains on the US standard of living following the mid-1930′s; indeed, Soviet GDP actually fell in 1940. Needless to say this growth was also achieved at much higher human cost than elsewhere.

(3) Everybody suffered from the wars and the collapse of trade during the 1940′s. The USSR did start recovering earlier, showing strong growth relative to the US during the 1950′s and to a lesser extent during the 1960′s; it also held its own against what were still the weakest West European economies, that is Portugal, Greece, Spain, and Ireland – although Italy sprinted far ahead. The fast growth during this period was structurally similar to the US some fifty years prior: The large-scale shift from agriculture to industry, which is a one-off in historical terms.

(4) Once this process started exhausting itself by the 1970′s, relative growth flat-lined at a base only 35% of America’s (or slightly more than 40%, taking into account only the RSFSR). By 1990, it dipped below 30%. Note that it is a linear downslope from 1975, well before perestroika or “reforms”. From 1970 a sharp gap began to develop with Portugal, Greece, Spain, and Ireland; by 1990, for instance, the weakest of this group, Portugal, was at 50% of US GDP per capita. European nations that a century ago were overwhelmingly rural, undeveloped and superstitious just like the Russian Empire had now pulled decisively ahead of Soviet Russia; during the 2000′s, Ireland briefly almost converged with the US! While as we all know, during the 1990′s, the Russian economy fell into a precipitous collapse…

(5) Yes, on the one hand, this collapse wouldn’t have happened had the USSR retained political authority and central planning. On the other hand, there does not appear to be any good reason that the USSR should have experienced a productivity spurt relative to the US; if anything the reverse as demographic prospects were deteriorating by the 1980′s (especially the pool of surplus rural labor was drying up) and resources for higher investment rates were hard to find (due to the demands of the MIC, and falling oil prices). Indeed, Goskomstat planners in the late 1980′s assumed growth to the end of the millennium would be around 1.5% per annum, i.e. even further decline relative to the US. In the big picture, Russia exchanged a very punishing transitional depression for the prospect of normal market growth, which has predominated since 1998, and the longterm possibility of real convergence.

fennoscandia-russia-gdp-usa-compared

Another interesting set of countries Russia can be compared to are Fennoscania, though with a word of caution – Sweden, Norway, and to a lesser extent Finland were in literacy (human capital) terms far ahead of the late Russian Empire. Note that Finland, relatively backward nonetheless, declines more relative to the US than its Nordic neighbors; again, presumably a function of its initial backwardness (highly rural, can’t grow fast). Its performance in the 1930′s is every bit as impressive as Russia’s, and unlike the USSR, it continues to rapidly converge with US living standards from the 1960′s onwards. Note that Finland was only a modestly richer subject of the Russian Empire in 1913 than the national average.

russia-gdp-historical-compared

The final graph shows Russia’s historical performance relative to the US, Finland, Greece, and Portugal all in one. It is particularly telling that plotted against Finland, it is a story of almost inexorable decline during the Soviet period. While Russia did makes massive gains vis-a-vis Portugal and Greece under Stalinism, both the latter grew far more quickly during the 1950′s and 1960′s, with the result that they overtook the USSR in per capita terms at around 1970 and held a substantial lead by the 1980′s. This substantial gap became an awning abyss during the catastrophic nineties, however it is important to emphasize that the economy of the 1990′s was for the most part still a continuation of (well, the dissolution of) the stagnant Soviet command economy.

There are of course many caveats. Some might argue that what the USSR suffered from in inefficiency it made up for in more focus on developing human capital (which is the single most important factor for long-term productivity growth). I don’t see this as convincing. As mentioned above, literacy rates by the 1910′s were above 40%; the school enrollment figures of the mid-1910′s would only be reattained in 1925. It is simply wrong to say that the Tsarist regime neglected human capital, it was just developing it from a lower base and the Soviets merely took over that process.

The two biggest problems were that (1) the Soviet economy was seemingly unable to develop to more than 40% of the US per capita level, due to its inefficiency – that was its ceiling; and what’s worse, (2) it could not be dismantled without incurring a hyper-depression in the meantime. That second point is the reason why many Russian leftists continue to insist that the Soviet economy was a good thing, at least it held steady relative to the Americans under Brezhnev as opposed to collapsing in the 1990′s (which is in actuality the collapse of the Soviet economy), and being on the retreat throughout late Tsarism (for aforementioned structural reasons, but whose negative influence was weakened from the 1900′s); they also for some reason think that a GDP per capita at 40% of the US level is something to be proud of.

Addendum 6/22: I noticed Sergey Zhuravlev makes much the same arguments in his article Wily Lines

(Republished from Da Russophile by permission of author or representative)
 
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Just in case you thought the correlation between human capital and economic development was an artifice of the post-socialist world, here is a similar graph (R2=0.4273) for all the world’s countries that have participated in the Math and Science portions of the PISA or TIMMS (8th grade) international standardized student assessments.

education-economy-global-1

The methodology is the same as described in the previous post. As you can see, the relation is every bit as strong at the global level. However, you may point to a few outliers. How to explain them?

Corruption, institutions and “governance”, “ease of business” indicators, etc. are all next to useless; in fact, it has even been found that some corruption is better for growth than no corrupt at all (though there is a critical point of extreme corruption at which it becomes deeply harmful).

But these are minor technical discussions. As far as I can see, there are only three major factors that explain why some countries diverge from the close correlation (R2=0.8393) between human capital and economic development observed in normal countries with a long history of capitalist development: (1) Major exporters and mineral exporters, relative to their total GDP; (2) Countries with a legacy of socialism and central planning; and (3) Countries with small populations that are also major financial, tax haven, or tourism centers.

education-economy-global-3

As you can see from the graph below, the conventional countries would form a nice best fit exponential curve (R2=0.8393). So would the countries with socialist legacies (R2=0.4908), albeit with greater dispersion and at a systemically lower level than the normal capitalist ones – especially once you remove those among them with substantial resource endowments. The same in reverse applies considering those countries that have managed to occupy niches in tourism, providing tax havens, and above all in financial services (R2=0.6014) – they do systemically better than the normal capitalist countries. The only countries to defy this iron correlation between are those whose oil production enables their populations to live off the rents from it (R2=0.0002); but these Rich Oilmen countries are very few in number, and concentrated in the Gulf.

The Capitalist Normals

The Capitalist Normals (blue) have long histories of capitalist development, and while some – like Australia or Argentina – may have large primary resource endowments, they cannot be said to dominate the economy. They have a very close correlation (at least by social science standards) between levels of human capital and economic development. The developed countries in this band occupy the global technological frontier. As usual, the outliers tend to be exceptions that prove the rule, so I’ll focus on them.

Argentina does slightly better than its PISA scores might otherwise indicate, but here there may be a few explanations: (1) Older Argentinians are far better educated than their counterparts in most of the rest of Latin America; (2) Low school-leaver human capital may be in part compensated by having the continent’s highest tertiary enrollment ratio.

UPDATE: The Argentina outlier is solved. According to Steve Sailer, Argentina’s low score is thanks to the scrupulousness of its school administrators, who – unlike most other countries – took the effort to track down the truants and drop-outs, who constituted 39% of its school-age population. Without this effect, Argentina’s score would have been about 40 points higher, i.e. above Mexico, and similar to Chile and Bulgaria, that is to say right where it should be. Sailer also makes the observation that since truancy tends to be more prevalent in poorer countries – a factor that is only rare adjusted for in the PISA tests – the gap in the human capital of older schoolchildren between the high-scoring developed world and the low-scoring developing world are, if anything, even higher than recorded in these tests.

Syria and Jordan both do a bit worse than their potential. Perhaps the influx of poor Palestinian refugees depresses Jordanian per capita wealth, while Syria is hampered by an extremely statist economy.

Israel is a major positive outlier. One explanation is that there is a lot of math and scientific aptitude diversity within Israel, with Arabs and Sephardi Jews performing badly and Ashkenazi Jews doing much better and perhaps a great deal of variation within the higher-IQ Ashkenazi group in particular; however, this is not borne out in the statistics, with the standard deviation for Israeli scores no higher than in many other countries. So why is it richer than, say, Turkey? No idea. Maybe because of US financial help, which is not inconsiderable. Maybe because the entrepreneurial Jew stereotype is correct even if the clever Jew stereotype isn’t.

Greece is a minor positive outlier, but their debt crisis is cutting it down to where it should be; as with Ireland a few years ago (it used to be an outlier in 2007 but is no longer). I guess the invisible hand has a sense of justice.

The United States is the most significant positive outlier, getting almost $10,000 more GDP than would be warranted by its human capital levels, which are comparable to Sweden or Australia. One major factor is surely that Americans simply work much longer than Europeans; their productivity levels, output per hour worked is, in fact, virtually equal to that of Germans or Swedes. It also helps that it has plentiful land per capita with the world’s best natural riverine transport system – and useful land, not permafrost like in much of Russia or Canada – and controls the world’s reserve currency.

Korea is a major negative outlier, one of the world’s cleverest countries but one that hasn’t yet even fully caught up with Italy. However its case – as is, to a lesser extent, that of Finland and Taiwan – is explainable by the simple fact that for them, “convergence” isn’t a finished process; they continue to grow relatively rapidly by already-developed country standards, they do not have any debt or fiscal crises, and they can expect to continue moving in the direction of ultra-rich countries like Switzerland and Singapore in the next decades. That said, Japan – also a minor negative outlier – indicates there may be diminishing returns to ever more impressively educated populaces.

It is important to emphasize, also, which countries in this category are NOT outliers: Brazil, Mexico (despite a substantial oil endowment), Indonesia, India, and Turkey. Also South Africa, which is not in this database, but can be inferred to have very low human capital based on its still prevalent illiteracy and very low TIMMS (4th grade) results. Now Brazil and India are regarded in the Davos press as superior to Russia, and in the long-term superior to China also (by virtue, so their argue, of their democracy and “demographic dividends”); the other nations cited here have all at one time or another been suggested as replacements for Russia in the BRIC’s.

If we are however to regard human capital as the main determinant of the natural level of economic development, and the “potential gap” between the two to be the most reliable determinant of future growth prospects, then the best BRIC by far is China, followed by Russia; to the contrary, India and Brazil (and any prospective BRIC’s members) are unremarkable.

The Red Tigers

The Red Tigers (green) are countries with major legacies of socialism and often central planning. It is interesting to observe that countries where reforms started earlier (e.g. ex-Yugoslavia, East Central Europe) and where markets played a greater role under socialism are much closer to the “equilibrium level” indicated by their levels of human capital. That said, despite their relative affluence, their “potential gaps” are still substantial; for instance, the Czech Republic and Poland have human capital basically equivalent to that of Germany or the US, but are still up to twice as poor in terms of GDP (PPP) per capita. This implies that this group will continue converging to advanced developed countries in the years ahead.

Practically all outliers in this group are negative, and were already covered in the previous post. But to recap:

China is the mother of all outliers, and no doubt a very significant one – it has 1.3 billion people living at lower middle income levels (although a few provinces remain distinctly Third World) but their high-school students now outperform the US and most of the EU. In my opinion this is the result of a very special situation.

The Maoist state suppressed economic growth to a degree unprecedented in virtually any other state in the socialist camp; it also started from a very, very low base. But despite its ruinous economic views, its social policies – including basic education – were implemented far better than in almost any other low income country, and that on top of (a) their reverence for scholarship that only had its equivalent in the Protestant emphasis on literacy and (b) the observed high IQ of Chinese overseas communities which may have a genetic component. This means that when China introduced market reforms, the “potential gap” between its human capital and existing level of economic development was vast to a degree probably unprecedented anywhere else in the world and in all history. Hence thirty years’ worth of 10% GDP growth that shows no sign of stopping (in fact, China’s relative performance exceeds that of any other Asian tiger in their stage of rapid development). And barring a major and unexpected discontinuity is should NOT stop until China reaches the level of per capita wealth Korea, Taiwan, or even Switzerland.

One minor caveat is that rapid development means that this “potential gap”, while vast, may no longer be quite as vast as indicated by the graph. Note that according to some estimates, China’s PPP GDP is now larger than America’s, which would give a GDP (PPP) per capita of $10,000-$12,000 or so.

Armenia, and to a lesser extent Serbia and Bosnia-Herzegovina, are negative outliers. Their cases are clear; they suffered from destructive wars in the 1990′s, and in Armenia’s case it remains surrounded by neighbors from hell.

The ex-Soviet countries without oil, such as Ukraine and Moldova, tend to be deeply negative outliers. One reason is that they reformed slowly (while the Soviet-era system crumbled about them), and late; and have suffered from particularly incompetent and avaricious governance; as I argued in a prior post, Ukraine never left the period of “anarchic stasis” that characterized Russia in the 1990′s. However, Ukraine’s perspectives aren’t looking good, at least in the short-term. Perhaps it’s because corruption, etc. are still so high that – while they normally don’t have much of an effect – reach such critical levels that they significantly stymie growth; an alternate, and more benign, explanation is that Ukraine’s GDP (PPP) is underestimated – it was not adjusted upwards like Russia’s in the recent OECD and World Bank recalculation of relative prices – meaning that Ukrainians already live better than the statistics indicate, their “potential gap” is smaller, and thus understandably there is less room for fast GDP growth.

Azerbaijan, Kazakhstan, and Russia are curious creatures in that in their case, the resource windfall boon works against the socialist legacy curse. This means that, despite that they are ex-Soviet – i.e., the economy was more deeply distorted and reforms started later than in much of the rest of the socialist camp – they are nonetheless on the upper part of the human capital and economic development curve, along with countries like the Czech Republic or Romania, and are not outliers like Ukraine or even Latvia.

At this point I would also like to demolish the myth of Georgia as a shining beacon of unimpeded economic progress in the Caucasus. It will not transform into Switzerland or Singapore, or even Estonia, any time soon, i.e. the next few decades. Its human capital is very low and it is already fairly close to the maximum economic potential enabled by it; this may be an achievement on Saakashvili’s part, who massively – one might say recklessly – liberalized the Georgian economy, which caused (or accompanied) a big growth spurt in the mid to late 2000′s. But it is unsustainable, first because Georgia is now far nearer the limits imposed by its low level of human capital; second, because if anything human capital has declined under Saakashvili (e.g. tertiary enrollment has nearly halved as university fees exploded, making post-school study much less affordable for ordinary Georgians).

The Oilmen

The Oilmen (red) are those very lucky countries with lots of oil and small populations. It is almost always oil; the sole exception in my sample is Botswana (diamonds and minerals).

Unlike either the Capitalist Normals or the Red Tigers, there is no correlation between levels of human capital and economic development among the Oil Guzzlers. That is because the oil production per capita effect, which relies on geological luck of the draw, overpowers all others. That said, they could be divided into a few distinct groupings.

(1) The Rich Oilmen. Qatar, Kuwait, and the UAE, and to a lesser extent Saudi Arabia, Bahrain, and Oman, are all fabulously rich thanks almost exclusively to their resource endowments. Their human capital is unimpressive and would not otherwise come anywhere near supporting their oil-enabled luxurious lifestyles. Their attempts at diversification are to be lauded, e.g. finance and tourism in Dubai, or journalism in Qatar, but these efforts are critically reliant on attracting foreign specialists with (oil) money so they are not sustainable.

(2) The Casual Oilmen. Norway and Russia benefit greatly from their oil windfalls; for a start, they largely rule out fiscal worries. Benefiting from uninterrupted capitalist development, Norway has transformed itself into one of the world’s wealthiest nations; even if it didn’t have oil, it would still be as rich as Sweden. Russia will probably never reach Norway’s level because the latter has far more oil per capita; nonetheless, it has a decent manufacturing base (e.g. capable of making stuff like GLONASS and advanced fighters) and a moderately growing economy that has no reason not to converge to Italy by 2020 and perhaps Sweden by 2025 or 2030. Tight supply and growing demand means that it is very unlikely that oil prices will fall and remain low in the foreseeable future, but even on the off chance that they do, Sergey Zhuravlev has calculated that the effects on Russia’s economy are going to be modest in the medium-term and negligible in the long-term.

(3) The Poor Oilmen. Oil is likewise of help for plugging budget holes to Algeria, Kazakhstan, Iran, Venezuela, Mexico, and Azerbaijan. However, unlike the case for the Rich Oilmen, their populations are too numerous to live off in sumptuous comfort off the rents; oil production per capita is too low. This means they can’t fly off into the stratosphere like the Rich Oilmen. They need non-oil based growth to become rich. But unlike the Casual Oilmen they are unlikely to achieve much of that because their human capital levels are very modest. If there is an oil crash, past experience – e.g., Venezuela in the 1980′s and 1990′s – suggests that they will be in for many years of stagnation and fiscal crises.

The Bankster Nations

The Bankster Nations (crosses) tend to be small countries which have managed to become major financial, tax haven, or tourism centers. Their GDP (PPP) per capita tends to be higher than the level suggested by their human capital, but not to anywhere near the same extent as the Rich Oilmen.

Liechtenstein is the biggest outlier in my database; its human capital is respectable, but its GDP (PPP) per capita at $141,000 is literally off the chart. No wonder when their population is a mere 30,000 souls. Luxembourg, Singapore, and Hong Kong have all carved themselves out very profitable niches as financial centers serving neighboring economies that are much bigger but also more regulated. Macao is Asia’s gambling center (and unofficial a conduit for Chinese money laundering). Cyprus serves a similar money laundering and reinvestment function for Russian nouveux riches, to the extent that the Russian government recently bailed out the island. Mauritius is a tax haven, and is also – along with Malta and Trinidad & Tobago – a popular vacation spot.

Switzerland is an entire nation that has devoted itself to financial services (including the more shady, secretive ones) as well as other very high added-value stuff like precision engineering and pharmaceuticals. And it has become extremely rich.

Without exception all these places are doing better or far better than the average Capitalist Normal country. That said, even here there is a definite correlation between human capital and GDP (PPP) per capita. These activities may require less hard work and scruples than is typical for other industries but they still require brains – especially for the high-end finance stuff. Not so surprising then that it is the highest human capital countries like Singapore, Hong Kong, and Switzerland that have become so prominent in it.

(Republished from Sublime Oblivion by permission of author or representative)
 
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It is not a secret to longtime readers of this blog that I rate India’s prospects far more pessimistically than I do China’s. My main reason is I do not share the delusion that democracy is a panacea and that whatever advantage in this sphere India has is more than outweighed by China’s lead in any number of other areas ranging from infrastructure and fiscal sustainability to child malnutrition and corruption. However, one of the biggest and certainly most critical gaps is in educational attainment, which is the most important component of human capital – the key factor underlying all productivity increases and longterm economic growth. China’s literacy rate is 96%, whereas Indian literacy is still far from universal at just 74%.

Many people claim that China’s educational success is superficial, arguing that although it has achieved good literacy figures, standards – especially in the poor rural areas that have been neglected by the state during the reform period – are very low. This is not a minority view. The problem is that for proof they cite figures such as the average number of years of schooling or secondary enrollment ratios – which are still substantially inferior to those of developed nations – and assume that they directly correlate to the human capital generated among Chinese youth. This is a flawed approach because it doesn’t take into account the quality of schooling. Though not without its problems, by far the most objective method of assessing that is to look at international standardized tests in literacy, numeracy, and science. The most comprehensive such study is PISA, and it tells a radically different story.

The big problem, until recently, was that there was no internationalized student testing data for either China or India. (There was data for cities like Hong Kong and Shanghai, but it was not very useful because they are hardly representative of China). An alternative approach was to compare national IQ’s, in which China usually scored 100-105 and India scored in the low 80′s. But this method has methodological flaws because the IQ tests aren’t consistent across countries. (This, incidentally, also makes this approach a punching bag for PC enforcers who can’t bear to entertain the possibility of differing IQ’s across national and ethnic groups).

In contrast, the PISA tests are standardized, and – barring a few quibbles – largely free of the consistency and sampling problems that tend to plague international IQ comparisons. And they confirm what the IQ data has long hinted at: At least among schoolchildren close to graduation, the Chinese are simply far, far smarter than their Indian counterparts (necessary caveat: As measured by these tests).

I already covered China, so I will simply quote in extenso from an older post. I emphasize the most important part in bold.

“As regular blog readers know, I think that educational capital and more broadly average IQ levels are one of the key – and frequently under-appreciated due to political correctness – determinants of economic development and whether or not convergence to developed country levels is even possible. Its much higher educational capital is one of the key reasons why I think China will continue doing much better than India in development, regardless of its “democratic deficit.” However, many people argue that China’s human capital must actually be quite low, because it doesn’t spend much on education, resources are bare in the provinces, statistical fudging under unaccountable governors, etc.

The recent results from the international standardized PISA tests in math, reading and science will make this an increasingly untenable position. Shanghai got by far the best results out of all the OECD countries (never mind the developing ones). Now while you might (rightly) argue Shanghai draws much of the elite of the Yangtze river delta, the Financial Times has more: “Citing further, as-yet unpublished OECD research, Mr Schleicher said: “We have actually done Pisa in 12 of the provinces in China. Even in some of the very poor areas you get performance close to the OECD average.””

Since countries like the US and France get scores “close to the OECD average”, this means that the workforces soon to be entering China’s economy, even from its poorest regions, will be no less skilled than those of leading Western economies (note too that the numbers of Chinese university graduates are soaring). And with China’s massive population, four times bigger than America’s, its road to superpowerdom must be all but guaranteed. [AK adds: I.e., because under market economies, development - as proxied by GDP per capita - tends to converge to a level commensurate with the human capital level of the country in question].”

Also in December 2011, but unnoticed by myself until now, PISA released additional information on nine countries*. Critically, this included two Indian provinces, Tamil Nadu and Himachal Pradesh. How did they do relative to China?

On math proficiency, Tamil Nadu scored 351 and Himachal Pradesh scored 338. On science, they scored 348 and 325, respectively. In both cases, they were at ROCK BOTTOM of the league table of the 74 sampled countries together with Kyrgyzstan. Literally no other country did worse.

In comparison, even the poorest Chinese regions performed close to the OECD average of about 500, putting them in the same rank as the bottom half of the industrialized countries such as Russia, Italy, or the United States (high 400′s); but well above other prominent developing states such as Brazil, Mexico, and Malaysia (high 300′s-low 400′s). The better off Chinese regions will have presumably done better, perhaps similar to Australia or Japan, while the most developed Chinese region, Shanghai, blew every other country out of the water with a mean score of 600 in math and 575 in science.

Note that Tamil Nadu is fairly developed by Indian standards, while Himachal Pradesh is about average. One simply shudders to imagine what the results would be in a poor state such as Bihar or Uttar Pradesh. China and India are both truly exceptional in educational attainment for dynamically developing emerging markets, but only the former is exceptional in a good way.

Many Indians like to see themselves as equal competitors to China, and are encouraged in their endeavour by gushing Western editorials and Tom Friedman drones who praise their few islands of programming prowess – in reality, much of which is actually pretty low-level stuff – and widespread knowledge of the English language (which makes India a good destination for call centers but not much else), while ignoring the various aspects of Indian life – the caste system, malnutrition, stupendously bad schools – that are holding them back. The low quality of Indians human capital reveals the “demographic dividend” that India is supposed to enjoy in the coming decades as the wild fantasies of what Sailer rightly calls “Davos Man craziness at its craziest.” A large cohort of young people is worse than useless when most of them are functionally illiterate and innumerate; instead of fostering well-compensated jobs that drive productivity forwards, they will form reservoirs of poverty and potential instability.

Instead of buying into their own rhetoric of a “India shining”, Indians would be better served by focusing on the nitty gritty of bringing childhood malnutrition DOWN to Sub-Saharan African levels, achieving the life expectancy of late Maoist China, and moving up at least to the level of a Mexico or Moldova in numeracy and science skills. Because as long as India’s human capital remains at the bottom of the global league tables so will the prosperity of its citizens.

* One other thing I noted in amusement is Georgia’s horrendous performance on the PISA: 379 in math, 373 in science. From being one of the most literate and urbane nationalities in the USSR to hanging out with Indonesia and Panama near the bottom of the international numeracy league tables, Georgians have sure come a long way under Saakashvili.

(Republished from Sublime Oblivion by permission of author or representative)
 
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One of the biggest questions in global history is why it was Western Europe that industrialized first, and ended up colonizing most of the rest of the world. As late as 1450, the possibility of such an outcome would have been ridiculed. By almost any metric, China was well in the lead through the medieval period – in technology (compass, paper, ship-building, gunpowder, movable type printing), government (bureaucrats were selected based on meritocratic exams, whereas in Europe professional civil services only began appearing in the 19th century), urbanization, etc.

In my view, most of the common explanations for the “European miracle” are largely self-congratulatory post hoc narratives that aren’t really convincing. Europe had markets, you say? For most of the medieval era, and even later, feudalism was the dominant social structure; the rising nation-states replaced it with mercantilism. Robber barons holed up in their castles charged extortionate rates on merchants passing through their fiefs. Throughout the period, most Chinese were freemen, enjoyed lower taxes, and fewer controls on land sales and industry; there were no internal trade barriers (instead, the government funded large projects such as the Grand Canal to economically unify the territory). China was far closer to the free market economy than Europe! Similar ventures only began to appear in Europe in the 18th century. In ancient regime France, there were internal controls on trade and many bureaucratic posts were up for sale to the highest bidder, a matter of considerable resentment that would contribute to the Revolution. Even the Enlightenment thinkers only dreamed of governing their countries as efficiently as they imagined the Celestial Empire did.

What about China’s stultifying Confucian traditionalism? Again, there was no shortage of reaction in Europe. No colonial empires bringing in revenue from trade and overseas commodities, because the Chinese grounded their fleet in the 1430′s? Please, Spain owned half the western hemisphere, and ended up stagnating despite (or because of) it; meanwhile, inland European regions with no colonial empires to speak of, such as the Ruhr or Silesia, industrialized early. Ravaged by rebellions, nomadic invasions, and repeated Malthusian crises? But Europe also had its fair share of these: the Black Death depressed European populations for nearly three centuries, and constituted a classical subsistence crisis, while some conflicts were also exceedingly devastating, e.g. the Thirty Years’ War that killed about a third of the German population. No good energy sources? China has as many rivers for watermills as Europe, and the Song dynasty produced more coal and pig iron in 1000AD than Europe did in 1800. The Chinese were hobbled by a low national IQ? This controversial theory was advanced in some circles to explain the historical failure of India or the Arab world, but whatever its merits, it surely can’t apply to China. Nor can several specific reasons given for the failures of other civilizations, such as water stress and desertification in the Middle East, or being on the wrong latitude as with Africa, India, and the Americas.

For a long time, I’ve only found two theories to be semi-plausible. First, Jared Diamond’s argument that China’s geography – a flatland of fertile river plains, capable of feeding big armies, with no major peninsulas that could host rival power bases – is naturally suited for unification (in contrast to Europe’s zigzag of mountain ranges and rugged peninsulas coasts). This reduced internal competition, so that the effects of bad policies – such as the occasional banning of private seafaring – reverberated throughout the whole of China, whereas in Europe only one region at a time suffered under Louis XIV’s fiscal depredations or the Spanish Inquisition. But on the other hand, surely this was counterbalanced by the returns to scale and (relative) internal peace enjoyed by a unified China, as opposed to fragmented Europe with its never-ending internecine wars? While IMO the charge of “geographical determinism” is thrown about too wildly nowadays, in this case it may be justified.

Second, as I said in my post on cliodynamics, the depth of Malthusian collapses that occurred in China were arguably bigger than in Europe, and tended to affect all of China at once (because of its greater internal connectedness). This meant that during these “dark age” periods, there may have been more technological regression in China than in Europe. Nonetheless, both of these theories are speculative and hedged with all manner of caveats. In my view, this question remains wide open.

However, I’m only writing this post because I think I’ve discovered a major, perhaps the major factor, that explains the “great divergence” between Europe and China. In short, it is China’s writing system.

From its origins in Phoenicia, the alphabet spread to Greece and Rome, and formed the building blocks of all future European literary culture. In contrast, China retains a system of hieroglyphs (汉字), inherited from the very earliest days of literacy (imagine using Egyptian hieroglyphs or Linear B today). All its writings are in the form of thousands of distinct symbols, and combinations thereof, expressing ideas. The hanzi may look much cooler than a standard alphabet, but in practice it throws up a host of serious problems.

1. Universal Literacy. It is much harder to attain practical literacy in Chinese, than it is in “normal” languages. A typical West European only has to know 26 or so symbols, and after that – because her language is mostly phonetic – she can transcribe most speech into text that is, at a minimum, legible and understandable. Not so for Chinese, where knowing how a word is pronounced is typically no clue as to how to write it. The PRC’s standards for literacy are recognition of 1,500 characters for rural dwellers and 2,000 characters for urban dwellers, but in fact it is estimated that real fluency requires knowledge at 3,000-4,000. Furthermore, this is passive recognition; writing stuff involves active recall, and is much more difficult still. David Moser’s The Writing on the Wall [DOC] has many amusing anecdotes on this subject, e.g.:

The most astounding example I encountered back in my early days studying Chinese was during a lunch with three graduate students in the Peking University Chinese department. I had a bad cold that day, and wanted to write a note to a friend to cancel a meeting. I found that I couldn’t write the character ti 嚔 in the word for “sneeze”, da penti 打喷嚔, and so I asked my three friends for help. To my amazement, none of the three could successfully retrieve the character ti 嚔. Three Chinese graduate students at China’s most prestigious university could not write the word for “sneeze” in their own native script! One simply cannot imagine a similar situation in a phonetic script environment – e.g., three Harvard graduate students unable to write a common word like “sneeze” in the orthography of their native language.

What was even more amazing – and puzzling – was that the Chinese people I dealt with showed almost no concern for this phenomenon. Most tended to explain away the situation as due to low educational standards, or merely natural everyday memory lapses. “And besides,” they would say to me, “Don’t you sometimes forget how to spell a word in English?” And I slowly began to realize that part of the problem is that, for most native Chinese, who have not grown up using an alphabetic system of writing, the contrast between the systems is not at all evident – they simply have no basis of comparison. Such people tend to assume that their difficulties are with the process of writing itself, rather than the particular writing system they are using.

Go, read his essay. And his other essay, Why Chinese Is So Damn Hard. Good, you’re back, and want to know what this has to do with China’s late industrialization. The answer is that, as I’ve argued many times on this blog, literacy rates, and educational human capital in general, is the most important prerequisite and determinant of economic development. The most literate countries in 1800 were also the richest ones in 2000. Thanks to its traditionally high levels of development and meritocratic system for grooming civil servants, China has always been relatively literate, until eclipsed by North Western Europe by 1800; as you can see in the graph below, its somewhat of an outlier. But knowing what we know of the peculiarities of literacy as limited by the very structure of its writing system…

(PS. Note that both Korean uses an alphabet; and so does Japanese, if a very complicated set of two alphabets (hiragana and katakana) with borrowings from Chinese hieroglyphs in the form of kanji. Could this, at least partially, explain why both Japan and Korea were far more successful at industrialization than China?)

One tentative implication is that the literacy rate estimated for historical China would be a fraction of its conventionally estimated percentage because to be able to functionally express the same range and depth of ideas in a hieroglyphic script as a scholar working with an alphabet-based writing system would constitute a much harder undertaking. I daresay that for anyone without a photographic memory, a great deal of time would simply be taken up with laboring over the Kangxi dictionary. This reduces the amount of mental energy that could be spent on more practical matters of original research or innovation.

2. Platonic Worldview. Many theorists have speculated about the role of traditionalism in keeping China back, but one can’t help noticing that such tendencies would logically be encouraged by the limitations of the Chinese writing system. Hieroglyphs originally evolved to keep track of two basic functions: religious ceremonies, trade accounts (e.g. bushels of grain delivered, etc), court historians (mostly formulaic accounts of dynasties, omens, wars, etc). As symbols stand for ideas, and given the simplicity of Chinese grammar, I suspect it is much harder to accurately convey unusual and complex phenomena in the Chinese script. Psychologically, this may have encouraged a Platonic worldview based on perfect forms, and the exaltation of traditional wisdom over the skeptical empirical, which is all antithetical to the scientific method.

3. Small Webs Of Reference. In pre-industrial times, much of what passed for industry and manufacturing was hands-and-eyes type of work, small artisans with apprentices and a few simple machine tools practicing their art in a workshop. China was abreast or ahead of medieval Europe in most of these spheres (barring a few things like eye-pieces and mechanical clocks). They even invented movable type printing well ahead of Europeans, which is truly amazing given how much simpler that system is for alphabet-based scripts. In some respects, Song China was already as economically developed as 18th century Europe. But they never made the leap to mass production and assembly lines; from about 1820, England made a qualitative spring forwards that China would not begin to replicate until the 1950′s.

Ultimately, the reason for this may reside in alphabetic script. Artisinal techniques can be conveyed well enough by word of mouth; the larger projects, such as dams or canals, can be overseen by a few very well-educated bureaucrats with the appropriate symbolic expertise. But once you get into the world of mass production, steamships, advanced metallurgy, chemicals, electricity, etc., then you can’t do without a big reservoir of specialists with a high degree of functional literacy, and a big, shared body of knowledge that these specialists can consult. The Chinese writing system is not conductive to the emergence of the far wider webs of reference, of citation and indexing, that is a prerequisite for an industrial takeoff. As Moser points out, this remains a problem even in the digitized modern age:

Yet even if some technological fix were to be devised to solve the problem of character entry, the non-alphabetic nature of the writing system still results in other serious and long-standing “invisible” problems. For example, the inclusion of a standard index to books, manuals and reference materials is made orders of magnitude more difficult by the Chinese writing system. The result is that to this day, the vast majority of non-fiction books published in China do not have an index, or anything like it. This fact seems incredible to those firmly ensconced in the alphabetic world, for obviously the lack of an index considerably lessens a book’s usefulness. Removing indexes from Western library books would be like an atomic bomb being dropped into academia. Yet their lack is a mundane fact of life in China.

… In virtually every informatic context, from library card catalogs to everyday user’s manuals, the relatively cumbersome Chinese writing system exerts a low-level but constant drag force on productivity, and tends to reinforce an undemocratic state of affairs in which only the educated elite or the doggedly determined make full use of the tools of the information environment.

Now imagine the challenges faced by Chinese scholars of yore, who did not even have the pinyin alphabetization system to help them out. In summary, the main problem of hieroglyphic writing systems is that it puts a mass of structural impediments towards the effective sharing of information that would not otherwise exist in an alphabetic system. This might be as good an explanation of why China reached a technological plateau early, and then largely stagnated for the better part of a millennium, as any other.

(Granted, there were improvements during this period. For instance, there was a huge burst in agricultural productivity during the Qing dynasty, which enabled the Chinese population to remain on par with the European. But this was a matter of traditional experimentation with crop varieties that has been practiced since the dawn of agriculture; an industrial revolution it does not – and cannot – make.)

Many pundits believe Chinese industrial catch-up is unsustainable because of its “traditional” lack of innovation and tendency to retreat into itself and stagnate. However, if this, for now admittedly fragile, theory is accurate, then the prospects for China under 21st century technological conditions look auspicious (for now, we’ll leave aside issues of climate change and Limits to Growth). Automatic translators can instantly look up any characters; likewise, any pinyin can be instantly converted into the appropriate character. Cell phone apps can recognize characters on paper and translate them. In tandem, a limited alphabetization and modern IT have overcome most of the structural difficulties that once stymied Chinese breakthrough into the world of industrialism and hi-tech. Furthermore, the critical languages of the future are those of math and computer science, and in these the Chinese are on a level playing field.

I can only finish these ruminations with a few comments on the big debate surrounding the simplification and/or alphabetization of Chinese. Largely, the latter is far more effective than the former; simplification may, in most (but not all) cases, improve the chances of character memorization, but it doesn’t resolve the core problems of hieroglyphic writing systems. On the other hand, the Chinese characters are a major cultural legacy and losing them would be tragic. As such, it would be best IMO to use pinyin (or Gwoyeu Romatzyh; I wish, LOL!) for practical purposes, but continue compulsory teaching of Traditional and Simplified characters for their historical and literary value.

(Republished from Sublime Oblivion by permission of author or representative)
 
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How will the global South fare in our likely future of energy shortages, climate change and resource nationalism (and wars)? India has China’s population mass, but lacks its industrial dynamism and human capital. Africa has Russia’s energy and mineral wealth, but not the military power or social coherence to defend it. South America’s prospects appear brighter – it at least may have the crucial degree of strategic isolation, industrial infrastructure and energy and agricultural wealth to eke out a comfortable (if not luxurious) existence in the turbulent times ahead. In the next few posts, I will assess the future prospects of these three regions in the post-peak oil world, starting with India.

A 2007 Goldman Sachs report estimated India’s GDP growth potential at about 8% until 2020, reinforcing the hype of recent years over “India shining” and the vigorous IT industry springing up in oases like Bangalore. This may well be realistic, even despite India’s manifold social problems (low human capital, creaky infrastructure, caste-based inequalities, an unwieldy bureaucracy, sluggish courts, etc), under a global “business-as-usual” scenario. That however is highly unlikely, for the hard numbers suggest that India will be economically and geopolitically squeezed out of the resources it needs to prosper or even survive by its massive eastern neighbor, China. There are limits to growth on our planet and no guarantees that they will be distributed fairly or equitably in the coming age of scarcity industrialism.

Why India is not China

The two countries share fundamental similarities. Both have more than a billion inhabitants, sustained by great rivers like the Ganges, Huang He and Yangtze that are fed by the (melting) Himalayan glaciers. Both rely on coal to meet the bulk of their primary energy needs and will need to import ever more hydrocarbons, metals and food products from abroad to power future growth. Both are ancient hydraulic civilizations that got left behind during the Industrial Revolution and are now determined to make up lost time. But to realize these dreams, they must compete with each other – directly or indirectly – for the same global energy, mineral and water resources.

Unfortunately for India, its Chinese competitor is dominant across practically all indices of national power one cares to compare.

India China
GDP / capita 2009 2900$ 6600$
Literacy rate 1995-2005 66% 93%
Manufacturing sector (current prices) 2008 190bn $ 1800bn $
Internet penetration 2008 5% 22%
Planned infrastructure spending 2008-11 240bn $ 725bn $
Naval tonnage 164,000 346,000

[Sources: GDP per capita; literacy; manufacturing; Internet penetration; infrastructure; naval].

Let’s now look at the significance of each of the above. First, the average Chinese is now substantially richer than the average Indian. This matters because state power is tied to the surplus it can extract in taxes from a recalcitrant citizenry. There is no better proof of the importance of technological advancement and per capita productivity than 19th century Qing China, which although still the world’s largest economy during the Opium Wars got casually trounced by British gunships with modern artillery and steam power. We aren’t talking about that kind of gap between India and China, of course, but it does exist. The Chinese are now simply better able to actualize advanced industrial and military technologies that they buy (or steal) from the developed world into forms of power that matter – renewable energy, supercomputers, naval C&C, etc…

china-india-growth

China leapfrogged India despite the ruinous economic legacy of Maoism, which was surely far worse than that of the “License Raj”. The best way of explaining this puzzle is in terms of China’s better educational profile. The main determinant of long-term economic growth is a country’s human capital (see 1, 2, 3), which for the most part consists of the educational attainment of its population (which in turn is strongly correlated with its level of national IQ). Not only has China implemented basic schooling far more comprehensively than India (see the literacy rates), but in the past decade it has also charged ahead in tertiary enrollments. And there is some evidence that the Chinese have a big structural advantage in IQ over Indians; if that is truly the case, then convergence will be nigh impossible in principle.

As a result of its huge pool of well-educated workers, China enjoys an almost total industrial supremacy over India. China’s manufacturing sector was worth nine times India’s in 2008. This is reflected in practically any sector one cares to survey. Last year, China produced near half the world’s steel and almost ten times India’s output, and 13.8mn automobiles to India’s 2.6mn. In the most fundamental industrial sector, machine tool building, China was global first with 15bn $ of output, relative to India’s insignificant 268mn $. In summary: China is charging past America; India lingers at the level of France, Brazil and Russia.

No matter the hype around IT services off-shoring to India, its eastern rival is more “informatized” (despite the debilitating effects of China’s Great Firewall). Not only is China’s infrastructure already leagues ahead of India’s, it continues to spend three times as much on expanding it further.

Finally, China has a military edge over India – not only in numbers, but also qualitatively in crucial sectors such as naval, space, strategic nuclear and cyberwar. The PRC has a third of the world’s shipbuilding capacity (India has the world’s biggest shipbreaking industry) and some projections indicate the PLAN could have more warships than the USN by 2020. India does not have the industrial strength to embark on such an ambitious enterprise. Plus, a significant part of its military budget is tied up in maintaining military superiority over Pakistan on land; as a result, resources get diverted from the all-important Navy.

India in the Age of Scarcity Industrialism

Though both Asian giants are essentially world-islands (that is, civilizations so deep and self-contained as to constitute their own worlds), they are increasingly tied to the larger world system of capital and resource flows. Their economic progress and rising affluence has to be supported by outside energy sources. Meanwhile, trends such as climate change and urbanization are slated to suppress their agricultural yields, necessitating more imports of “virtual water” in the form of food from abroad. As such, it is vital for both China and India to develop both ways of paying for these life-giving imports (e.g. selling goods, accumulating foreign currency) or if necessary seizing them by force (using gunboats and expeditionary forces). Thus it is their common geopolitical prerogative to safeguard the sealanes carrying their bulk commodity inflows from the Middle East, Africa and South America.

Chinese naval modernization is proceeding in tandem with a far-sighted “string of pearls” strategy of naval base construction on its outlying coastal islands and friendly nations such as Myanmar, Sri Lanka, Bangladesh, and Pakistan (they will host radar stations, anti-ship batteries and logistics hubs for naval operations). India has no such project at sea, while on land it is constrained by the hilly jungles of Indochina to the east, the impenetrable Himalayas to the north and a hostile Pakistan to the west. Though it does have a thin slice of access to chaotic, mineral-rich Afghanistan and Russian-dominated Central Asia, it is hard to see how India can marshal the political will and capital resources to build the necessary infrastructure to exploit them.

It should not be forgotten that India faces severe challenges managing its own subcontinent. Contrary to popular opinion, the Pakistani military is not the foremost strategic threat to India – even the worse-case scenario, a full-scale nuclear exchange, will not kill more than 1% of the Indian population. Far more worrying is the specter of the collapse of the Pakistani state. The region contains a 168mn strong population, growing at more than 2% a year, in a desert only made habitable by canal systems drawing on the Indus River, which is dependent on Himalayan glacial runoff for 90% of its water volume. Perpetually capital-poor, indebted and overpopulated, Pakistan faces the specter of a drying Indus by the 2040′s (if the more pessimistic studies are correct)… after that come the climate refugees, the collapse of the Punjab breadbasket, the raids from the Baloch highlands and general nuclearized anarchy. Bangladesh, most of whose 160mn people live just one or two meters above sea level in an area the size of England, could literally find itself underwater as the 21st century grinds on. No wonder India is pouring 1.2bn $ into a border fence sealing it off.

(Incidentally, the prospect of failed states spilling mass columns of refugees into India would make a great leverage point for China. By supporting Pakistan and Bangladesh just enough to prevent them from collapsing, they would become its vassals…)

India too will experience diminished river flows because of melting glaciers, but not to a critical extent like Pakistan, because the Ganges and Brahmaputra are far more monsoonal. (Nonetheless, like China, India has some very ambitious water megaprojects on the cards). In an abrupt reversal from the earlier successes of the Green Revolution, the rapid depletion of the fossil aquifers used for irrigation in India is contributing to stagnating food production. Though China also suffers from the same problem, it is better equipped to weather it by virtue of its economic strength (foods for goods deals) and strategic foresight (e.g. buying foreign farmlands).

India’s best strategy now is to push the Japan-Korea-Russia-India strategic alliance concept beyond mere rhetoric. If these countries remain splintered in the face of a waning American superpower, Chinese hegemony in the Pacific and Indian Oceans becomes near inevitable. On the other hand, Japanese and Korean capital and knowhow, Russian energy and military technology and Indian manpower and potential economic dynamism could balance out China (and their foreign policy experts worry at the prospect). This diplomacy should be pursued in conjunction with increased spending on ballistic missile defense (to neutralize the Pakistani strategic threat), buying back Sri Lanka (to break China’s string of pearls) and most importantly naval expansion (to exert control over the Indian Ocean littoral).

Conclusions

Some commentators believe India has a long-term advantage over China because of 1) its vibrant liberal democracy and 2) younger and more fertile population. I disagree on both counts.

First, there is no empirical evidence showing that democracies develop faster than authoritarian regimes; indeed, the converse is often true, since the latter can often suppress living standards to squeeze out more resources for investment (on the other hand democracies tend to be freer of the megalomaniac delusions indulged in by some autocrats and hence experience fewer absolute train-wrecks). There may well be a case to be made that a more authoritarian Indian government could have provided mass education and infrastructure better and earlier. Or maybe not: as Amartya Sen theorized in The Argumentative Indian, they do have a traditionally open and discursive culture, one that seems far closer to the West than “Oriental despotism”. Regardless, I think it is safe to say that at least until both Asian giants become fully developed – which will take decades if it ever happens at all – democracy won’t give India any significant advantages.

Second, the idea that China will grow old before it will grow rich is one that should die already. If you don’t want to read this Goldman Sachs report, consider that China’s current development level is the same as South Korea’s in the late 1980′s; its fertility transition lags by only a decade or so (Korea’s fertility fell below replacement level rates in 1983 and is now at 1.19 children per woman; China’s in 1993 and is now at 1.77 children per woman*). Doesn’t exactly sound like the makings of a demographic apocalypse. Meanwhile, India’s huge (and still growing at 1.3% per year) population will sooner be a liability than an asset.

In the final analysis, demography and democracy count for little in the hard, cold (or should that be hot?) world of the post-peak oil future. What matters is India’s capacity to build a modern, sustainable society, solve its environmental challenges and overcome its geopolitical dilemmas. So far it has been largely unsuccessful on all three fronts. Development is largely confined to urban oases, at the cost of further environmental strains and geopolitical dependencies. Its policy-makers do not appear to be pursuing a coherent grand strategy. And when it comes to the manifold impacts of scarcity industrialism – diminishing energy and food sources, climate change, failed states – India is subject to forces beyond its control. It is hard to avoid the conclusion that India faces an increasingly bleak future in a world of limits to growth.

* Adjust down to 1.60 to take into account the male-female gender imbalance.

(Republished from Sublime Oblivion by permission of author or representative)
 
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My recent post on demographic myths unleashed a lively discussion on the issue of race and IQ in the comments section. I’m not too interested in wading into it: not out of any misplaced respect for political correctness, of course, but simply because though I think there are good arguments for both sides, it misses the largest issue. On the one hand, that there exist differences in measured IQ between races in the US and between nations is beyond dispute, and there is strong evidence to suggest that IQ is a strongly hereditary trait. On the other hand, one must also keep in mind that culture plays an indelible role on the formation and very definition of IQ. One striking demonstration of this is a “similarities test” administered by Michael Cole on members of the Kpelle tribe in Liberia, in which they were asked to group objects into categories such as food, tools, etc. They chose functional pairings – e.g. knife and potato, because a knife could not not cut a spoon – because a “Wise man could do such-and-such”. It was only when the researchers asked “How would a fool do it” that the tribesmen rearranged the items into their “correct” categories. So can the Kpelle really be called dumb? Isn’t their form of intelligence, though demented in the eyes of industrial man, actually eminently suited for their natural environment?

However, once upon a time, European peoples too had this psychology. Throughout the world the illiterate peasant tended to be dull, uninquisitive, childlike. (In stark contrast to the slick, lettered, cosmopolitan city-dweller). For instance, in an earlier post I mentioned the article Reconsidering Weber: Literacy and the Spirit of Capitalism by Russian sociologist Andrey Korotayev.

Literacy does not simply facilitate the process of perceiving innovation by an individual. It also changes her or his cognition to a certain extent. [A study by Soviet psychologists on Central Asians during the 1930's] shows that education has a fundamental effect on the formation of cognitive processes (perception, memory, cognition). The researchers found out that illiterate respondents, unlike literate ones, preferred concrete names for colors to abstract ones, and situative groupings of items to categorical ones (note that abstract thinking is based on category cognition). Furthermore, illiterate respondents could not solve syllogistic problems like the following one – “Precious metals do not get rust. Gold is a precious metal. Can gold get rust or not?”. These syllogistic problems did not make any sense to illiterate respondents because they were out of the sphere of their practical experience. Literate respondents who had at least minimal formal education solved the suggested syllogistic problems easily (Luria 1974, 1976, 1982: 47–69).

Therefore, literate workers, soldiers, inventors and so on turn out to be more effective than illiterate ones not only due to their ability to read instructions, manuals, and textbooks, but also because of the developed skills of abstract thinking…

So, 1970′s Kpelle = 1930′s Central Asians? Now fast forward to today. Many Central Asians are Turkic, and their level of social development – if not economic development (due to an adverse geography and a socialist legacy) – is similar to Turkey’s. The Turks are estimated to have a national IQ of 85-90; not retarded, but substantially less intelligent than average Europeans and East Asians. For instance, the IQ of the US is estimated to be around 10 points higher. But if American children during the 1930′s had taken the IQ tests of the 1990′s, it is estimated they’d have performed about 20-25 points lower (that’s like today’s India or Brazil, or 10 points lower than Turks)! This is explained by the rapid secular rise in intelligence during the past century called the Flynn Effect.

iq-world-map

[Map of world IQ (Richard Lynn & Tatu Vanhanen, 2002). Click to enlarge.]

Such an increase is beyond the power of genetics. According to Flynn – and I find this to be convincing – his effect can be ascribed to the environmental changes produced by modernization and the industrial system. He cites the following example: in response to the question “What do a dog and a rabbit have in common?”, whereas a modern respondent would say they are both mammals (abstract answer), someone from a century ago might say that one would catch rabbits with dogs (a concrete or functional answer). It would appear that it’s not so much general IQ that has improved – though probably it did too thanks to better nutrition – but the specialized IQ (abstract, categorizing) that is needed to sustain an industrial system.

But I’d prefer to imagine it in the following way. Think of the brain as hardware. Just as human races* possess various skin colors and physiologies that have evolved over eons in their environments, so it is likely that there appeared subtle racial variations in the genetic component of intelligence. To take a (very idealized) example, it would seem intuitive that someone descended from “hunters” would have a predilection for motor skills (to chuck spears at prey), while someone whose distant ancestors were “gatherers” would be relatively more adept at pattern recognition (to notice berries and be able to tell which are poisonous and which are not).

Nonetheless, three factors would mitigate these differences. First, the human species is very mixed and interbred; apart from small groups that spent a long time in isolation (such as the Tasmanian aborigines), inter-racial distinctions are unlikely to be very sharp. Second, the brain’s hardware works much more effectively if properly maintained; to that end, improvements in nutrition would have the effect of raising IQ levels, especially from the lower end of the scale (as indeed happened in the US during the 20th century). Third, and most importantly, the actual software of intelligence – the intangible of culture and memetics, which is a product of an (ever-changing) environment – has been evolving far, far faster than the hardware. Whatever their racial differences, a Gaelic office worker has far more in common with an ethnic !Kung physicist living in Ireland (mentally, psychologically) than with his own ancestors of a mere century ago.

Peasants and hunter-gatherers may not have much skill in abstract thinking, but they do tend to be intimately aware of the world around them and cognizant of things that will help them get food on the table or cure a sickness. Today’s Arabs in the Middle East may score low on IQ tests and have the lowest literacy rates outside sub-Saharan Africa – even bin Laden complained that more books are translated into Spanish every year than have ever been translated into Arabic! – but many of them are phenomenal mentats who can recite the Koran from cover to cover (if not necessarily actually read the script!). Very impressive, but not that useful for building an industrial base, let alone an innovation economy. As for the typical Westerner, unlike a few decades ago – or unlike today’s Russians, for that matter, who still memorize Pushkin and Lermontov by heart at school – he or she can’t recite a single classical poem. But Westerners are unparalleled at creating and inventing new products and services in the unfolding Information Age…

Why have some human societies been much more successful at industrializing and modernizing than others? The roots are unlikely to be racial differences in IQ. The work of people like David Landes or Jared Diamond explains this better…

Furthermore, the link between modernization and IQ is not one way. The main determinant of long-term economic growth is a country’s human capital (see 1, 2, 3), which for the most part consists of the educational attainment of its population, which in turn is strongly correlated with its level of national IQ**.

 education-capital

[In my old post Education as the Elixir of Growth, I worked out a Human Capital Index for a range of countries - based on things such as literacy, international standardized test scores (which are closely correlated with national IQ) and tertiary enrollment - and plotted them against their levels of GDP per capita. Red dots are countries with a socialist legacy and are below the level they are expected to be at; green dots are countries propelled into being upper outliers by virtue of resource windfalls, such as Saudi Arabia. Cyan dots are all other outliers. Click to enlarge.]

education-growth

[Countries are marked by GDP / capita growth rates from 1997 to 2007. The colors go as follows: white (1.0-1.9%); yellow (2.0-2.9%); orange (3.0-3.9%); red (4.0-5.9%); dark red (6.0%-7.9%) and black (8.0%-14.9%). GDP per capita figures (on the y-axis) are for 1997 – this is because what we are interested in is the influence of education levels on future growth, which we know for the period from 1997 up until today. Unfortunately, educational stats for 1997 are much less comprehensive (PISA and TIMMS embraced much fewer countries then), plus it would take a lot of time digging them up – hence I made a rough assumption that they were the same as for 2007 (which is fairly accurate - it is impossible to radically change a country's human capital profile within the space of a single decade). Note how almost all the fastest-growing countries were well below the logical level dictated by their human capital potential. Click to enlarge.]

This, incidentally, explains my fundamental optimism about the long-term prospects of China and Russia (1, 2) – and my pessimism on India and Brazil. (Amongst the Economist-reading class which thinks liberal democracy is a panacea the impression tends to be the inverse). In summary:

  • China is the biggest creditor and set to become the world’s biggest manufacturer in 2011; though its level of tertiary attainment is still low, it has good basic education and a high national IQ. Russia has superb human capital, energy windfall and fiscal firepower. Similar things can be said for most of the rest of Eastern Europe, East Asia and Eurasia.
  • Many Indians remain functionally illiterate; though Brazil has progressed further, international standardized tests confirm its woeful educational standards. Similar things can be said about most of the rest of Latin America, South Asia, the Middle East and Africa. These regions are unlikely to converge to developed levels anytime soon.
  • In the West itself, the Flynn Effect has stalled and may even have gone into slow retreat – in any case, human capital development is no longer a driver of growth. Meanwhile, it faces many challenges, such as fiscal (un)sustainability and aging populations. It will remain near the theoretical upper boundaries of development, but these boundaries are likely to start contracting in the years ahead under the pressures of energy depletion.

None of this is due to the fact that Estonians or Chinese are “superior” to Indians or Germans. These are deep structural factors we’re talking about. Quite simply, unlike Mexicans, the former have the type of culture, education, IQ (call it what you will) that will enable them to sustain a developed techno-industrial base. According to the results of the PISA 2006 standardized tests in science, only 15% of Brazilians, 11% of Indonesians, 18% of Mexicans and 22% of Turks possessed skills beyond those needed for purely linear problem-solving, in contrast to 40% of Israelis, 48% of Russians, 51% of Americans, and 68% of Koreans. In other words, the latter nations have about 2-5x as many cadres capable of moving into hi-tech and high added-value manufacturing or services as the former. Is it really a logical leap then to consider their long-term development prospects that much brighter?

Likewise, the reason that Russians and Chinese will gain on Germans and Americans is also simple – the former have the capacity to absorb modern productivity-enhancing technologies, whereas the latter are already developed. This is just catch-up growth. Interestingly, I suspect that their catch-up will be very rapid in historical perspective due to 1) the economic waning of the Western world due to unsustainable fiscal policies, debt and rising costs of energy inputs and 2) the unprecedented ease of technology transfer (and theft!) bequeathed by the Internet.

In the near future, there will appear definite limits to further growth of the global techno-industrial base. Consequently, in a globalized world in which capital resources flow to where they can produce the greatest returns, we can expect nations like China to expand their share of global manufacturing to levels commensurate with their skilled industrial workforces. In fact, this seems to have been the case in the oil shock-induced crisis of 2008-2009: for instance, whereas global vehicle production fell by 14%, it expanded by a blistering 48% (!) in China, which now accounts for nearly a quarter of world output.

* Yes, I realize some scientists deny race and prefer to talk of genotypes, phenotypes and clines. For the sake of clarity, I’ll use the term “race” with the understanding that it is highly qualified.

** See my first post Education as the Elixir of Growth for the original argument. I didn’t bother connecting education with national IQ there, though I was familiar with their close relation, because I didn’t want to incite controversy. (Now I realize that’s a bad idea for a popular blogger!). In the last comment Steve Sailer made the connection explicit.

(Republished from Sublime Oblivion by permission of author or representative)
 
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One of the most interesting emerging sciences today, in my opinion, is cliodynamics. Their practitioners attempt to come to with mathematical models of history to explain “big history” – things like the rise of empires, social discontent, civil wars, and state collapse. To the casual observer history may appear to be chaotic and fathomless, devoid of any overreaching pattern or logic, and consequently the future is even more so (because “the past is all we have”).

This state of affairs, however, is slowly ebbing away. Of course, from the earliest times, civilizational theorists like Ibn Khaldun, Oswald Spengler and Arnold Toynbee dreamed of rationalizing history, and their efforts were expounded upon by thinkers like Nikolai Kondratiev, Fernand Braudel, Joseph Schumpeter, and Heinz von Foerster. However, it is only with the newest crop of pioneers like Andrei Korotayev, Sergey Nefedov, and Peter Turchin that a true, rigorous mathematized history is coming into being – a discipline recently christened cliodynamics.

As an introduction to this fascinating area of research, I will summarize, review, and run an active commentary on one of the most comprehensive and theoretical books on cliodynamics: Introduction to Social Macrodynamics by Korotayev et al (it’s quite rare, as there’s only a single copy of it in the entire UC library system). The key insight is that world demographic / economic history can be modeled to a high degree of accuracy by just three basic trends: hyperbolic / exponential, cyclical, and stochastic.

Korotayev, Andrei & Artemy Malkov, Daria KhaltourinaIntroduction to Social Macrodynamics: Secular Cycles and Millennial Trends (2006)
Category: cliodynamics, world systems; Rating: 5*/5
Summary: Andrei Korotayev (wiki); review @ cliodynamics.ru; a similar text на русском.

Introduction: Millennial Trends

Google Books has the first chapter Introduction: Millennial Trends.

In 1960, Heinz von Foerster showed that the world’s population at any given time between 1-1958 CE could be approximated by the simple equation below, where N is the population, t is time, C is a constant, and t(0) is a “doomsday” when the population becomes infinite (worked out to be 13 November, 2026).

(1) N(t) = C / ( t(0) – t )

According to Korotayev et al, this simple formula of hyperbolic explains 99%+ of the micro-variation in world population from 1000 to 1970. Furthermore, a quadratic-hyperbolic equation of the same type accurately represents the increase in the GDP. Why?

He discusses the work of Michael Kremer, who attempted to build a model by making the Malthusian assumption that “population is limited by the available technology, so that the growth rate of population is proportional to the growth rate of technology”, and the “Kuznetsian” assumption that “high population spurs technological change because it increases the number of potential inventors”.

(2) G = r*T*N^a

(3) dT/dt = b*N*T

Above, G is gross output, T is technology, N is population, and a, b, and r are parameters. Note that dT, change in technology, is dependent on both N (indicates potential number of inventors) and T (a wider technological base enabled more inventions to be made on its basis). Solving this system of equations results in hyperbolic population growth, illustrated by the following loop: population growth → more potential inventors → faster tech growth → faster growth of Earth’s carrying capacity → faster population growth.

Korotayev then counters arguments dismissing such theories as “demographic adventures of physicists” that have no validity because the world system was not integrated until relatively recently. However, that is only if you use Wallerstein’s “bulk-good” criterion. If one instead uses the softer “information-network” criterion, noting that there is evidence for the “systematic spread of major innovations… throughout the North African – Eurasian Oikumene for a few millennia BCE” – and bearing in mind that this emerging belt of cultures of similar technological complexity contained the vast majority of the global human population since the Neolithic Revolution – then this can be interpreted as “a tangible result of the World System’s functioning”.

Then Korotayev et al present their own model that describes not only the hyperbolic world population growth, but also the macrodynamics of global GDP in the world system until 1973.

(4) G = k1*T*N^a

(5) dN/dt = k2*S*N

(6) dT/dt = k3*N*T

Above, T is technology, N is population, S is surplus per person (and S = g – m, where g is production per person and m is the subsistence level required for zero population growth), and k1, k2, k3, and a are parameters. This can be simplified to:

(7) dN/dt = a*S*N

(8) dS/dt = b*N*S

(9) G = m*N + S*N

As S should be proportional to N in the long run, S = k*N. Replace.

(10) dN/dt = k*a*N^2

Recall that solving this differential equation gives us hyperbolic growth (1).

(11) N(t) = C / ( t(0) – t )

Furthermore, replacing N(t) above with S = k*N gives (12), allowing us to work out the “surplus world product” S*N (13).

(12) S = k*C / ( t(0) – t )

(13) S*N = k*C^2 / ( t(0) – t )^2

Hence in the long-run, this suggests that global GDP growth can be approximated by a quadratic hyperbola. Other indices that can be described by these or similar models include literacy, urbanization, etc.

One finding is that after 1973, there world GDP growth rate itself falls (rather than just a slowing of the growth of the GDP growth rate, as predicted by the original model): the explanation is, “the literate population is more inclined to direct a larger share of its GDP to resource restoration and to prefer resource economizing strategies than is the illiterate one, which, on the one hand, paves the way towards a sustainable-development society, but, on the other hand, slows down the economic growth rate”. To take this into account, they build a modified model, according to which, “the World System’s divergence from the blow-up regime would stabilize the world population, the world GDP… technological growth, however, will continue, though in exponential rather than hyperbolic form”.*

The consequences for the future are that though GDP growth will reach an asymptote, technological improvements will continue raising the standard of living due to the “Nordhaus effect” (e.g. combine Moore’s Law – exponentially cheapening computing power, with the growing penetration of ever more physical goods by IT).

“It appears important to stress that the present-day decrease of the World System’s growth rates differs radically from the decreases that inhered in oscillations of the past… it is a phase transition to a new development regime that differs radically from the ones typical of all previous history”. As evidence, unlike in all past eras, the slowing of the world population growth rate after the 1960′s did not occur against a backdrop of catastrophically falling living standards (famine, plague, wars, etc); to the contrary, the causes are the fall in fertility due to social security, more literacy, family planning, etc. Similarly, the decrease in the urbanization and literacy growth rates is not associated this time by the onset of Malthusian problems, but is set against continuing high economic growth and the “closeness of the saturation level”.

(AK: This rosy-tinged analysis is persuasive and somewhat rigorous, but there is a gaping hole – they used only “technology” as a proxy for the carrying capacity. However, as Limits to Growth teaches us, part of what technology did is open up a windfall of energy resources – high-grade oil, coal, and natural gas – that have been used to fuel much of the post-1800 growth in carrying capacity (disguised as “technology” in this model), yet whose gains are not permanent because of their unsustainable exploitation. Furthermore, the modern technological base is underpinned by the material base, and cannot survive without it – you can’t have semiconductor factories without reliable electricity supplies – and generally speaking, the more complex the technology, the greater the material base that is needed to sustain it (this may constitute an ultimate limit on technological expansion). This major factor is also neglected in Korotayev’s millennial model. As such, the conclusion that the world has truly and permanently reached a sustainable-development regime does not follow. This is not to say that it is without merit, however – it’s just that it needs to be integrated with the work done by the Limits to Growth / peak oil / climate modelers.)

Chapter 1: Secular Cycles

Korotayev et al conclude that these millennial models are only useful on the millennial scale (duh!), and that typical agrarian political-demographic cycles follow Malthusian dynamics because in the shorter term, population tends to growth much more rapidly than technology / carrying capacity, which led to a plateauing of the population, growing stress due to repeated perturbations, and an eventual tipping point over into collapse / dieoff.

The basic logic of these models is as follows. After the population reaches the ceiling of the carrying capacity of land, its growth rate declines toward near-zero values. The system experiences significant stress with decline in the living standards of the common population, increasing the severity of famines, growing rebellions, etc. As has been shown by Nefedov, most complex agrarian systems had considerable reserves for stability, however, within 50–150 years these reserves were usually exhausted and the system experienced a demographic collapse (a Malthusian catastrophe), when increasingly severe famines, epidemics, increasing internal warfare and other disasters led to a considerable decline of population. As a result of this collapse, free resources became available, per capita production and consumption considerably increased, the population growth resumed and a new sociodemographic cycle started.

He notes that newer models are far more complex and predict the dynamics of variables such as elite overproduction, class struggle, urbanization, and wealth inequality with a surprisingly high degree of accuracy (e.g. see A Model of Demographic Cycles in a Traditional Society: The Case of Ancient China by Nefedov). Korotayev et al then list three major approaches to modeling agrarian political-demographic cycles: Turchin (2003), Chu & Lee (1994), and Nefedov (1999-2004).

1. Turchin has constructed an elegant “fiscal-demographic” model, in which the state plays a positive role by by a) maintaining armed order against banditry and lawlessness, and b) doing works such as roads, canals, irrigations systems, flood control, etc, – both of which increase the effective carrying capacity. However, as demographic growth brings the population to the carrying capacity of the land (in practice, the population plateaus somewhat below it due to elite predation), surpluses diminish. So do the state’s revenues, since the state taxes surpluses; meanwhile, expenditures keep on rising (because of the reasons identified by Tainter). Eventually, there sets in a fiscal crisis and the state must tax the future to pay for the present by drawing down the surpluses accumulated in better days; when those surpluses run out, the state can no longer function and collapses, which leads to a radical decline of the carrying capacity and population as the land falls into anarchy and irrigation and transport infrastructure decays.

2. The Chu and Lee model consists of rulers (including soldiers), peasants (grow food), and bandits (steal food). The peasants support the rulers to fight the bandits, while there is a constant flux between the peasants and bandits whose magnitude depends on the caloric & survivability payoffs to belonging in each respective class. However, it’s not a fully-formed model as its main function is to fill in the gaps in the historical record, by plugging in already-known historical data on warfare and climatic factors; they neglected to associate crop production with climatic variability (colder winters result in lesser crop yields) and the role of the state in food distribution (which staved off collapse for some time and was historically significant in China).

3. Nefedov has integrated stochasticity into his models, in which random climatic effects produce different year-to-year crop yields. One result is that as carrying capacity is reached, surpluses vanish and the effects of good and bad years play an increasingly important role – i.e. a closed system under stress suffers increasingly from perturbations. One bad year can lead to a critical number of people leaving the farms for the cities or banditry, initiating a cascading collapse. However, he neglects the “direct role of rebellion and internal warfare on cycle behavior”, so as the model is purely economic, each demographic collapse is, implausibly, immediately followed by a new rise.

The ultimate aim of Korotayev et al is to integrate the positive features of all three models (Chapter 3), but for now the take a closer look at the political-demographic history of China, the pre-industrial civilization that maintained the best records.

Chapter 2: Historical Population Dynamics in China – Some Observations

Below is a graph of China’s population on a millennial scale. Note the magnitude and cyclical nature of its demographic collapses. Note also that such cycles are far from unique to Chinese civilization (see collapse of the Roman Empire), and reflect for a minute, even, on the profound difference between the modern world of permanent growth, and the pre-industrial, “Malthusian” world.

Since it would be futile to repeat the fine details of every political-demographic cycle in China’s, I will instead just list the main points.

  • The cycles tend to be ones of a fast rise in population, when surpluses are high and people are prosperous. It plateaus and stagnates when the population reaches the carrying capacity, when there is overpopulation, much lowered consumption, increasing debilitation of state power, and rising social inequality and urbanization.
  • Sometimes, such as in the middle Sung period, population stress did not lead to a collapse, but instead to a “radical rise of the carrying capacity of the land” through administrative and technological innovations. This increased the permanent ceiling of Chinese carrying capacity from 60mn to around 120mn souls, and in doing so alleviated the population stress until the early 12th century (AK: e.g. in Early Modern Britain, the problem of deforestation was solved by coal). At that point, China may have once again solved its problems, even escaping from its Malthusian trap (AK: some historians have noted that it had many of the prerequisites for an industrial revolution). That was not to be, as “the Sung cycle was interrupted quite artificially by exogenous forces, namely, by the Jurchen and finally Mongol conquests”.
  • The Yuan dynasty would not reach the highs of the Sung because of the general bleakness of the 14th century – the end of the Medieval Warm Period, unprecedented floods and droughts in China, etc, which lowered the carrying capacity to a critical level. The resulting famines and rebellions led to the demographic collapse of the 1350′s, as well as the de facto collapse of the state, as China transitioned to warlordism.
  • Carrying-capacity innovations under the Ming did not, eventually, outrun population growth, and it collapsed during the turmoil of the transition to the Qing dynasty. The innovations accelerated throughout the 18th century (e.g. New World crops, land reclamation, intensification of farming). Indications of subsistence stress as China entered the 19th century were a) declining life expectancies, b) rising staple prices, and c) a huge increase in female infanticide rates in the first half of the 18th century. By 1850, China was again under very severe subsistence stress and the state grew impotent just as Europeans began to encroach on the Celestial Empire.
  • Huang 2002: 528-9, worthy of quotation in extenso. “Recent research in Chinese legal history suggests that the same subsistence pressures behind female infanticide led to widespread selling of women and girls… Another related social phenomenon was the rise of an unmarried “rogue male” population, a result of both poverty (because the men could not afford to get married) and of the imbalance in sex ratios that followed from female infanticide. Recent research shows that this symptom of the mounting social crisis led, among other things, to large changes in Qing legislation vis-à-vis illicit sex… Even more telling, perhaps, is the host of new legislation targeting specifically the ‘baresticks’ single males (guanggun) and related ‘criminal sticks’ of bandits (guntu, feitu), clearly a major social problem in the eyes of the authorities of the time”. See Diagram V.13. (AK: Interestingly, China’s one-child policy, by artificially restricting fertility in order to ward off a “Maoist dynasty” Malthusian crisis, has led to many of the same problems in the past two decades).
  • Speaking of which… China had further dips in its population after during perturbations in the 1850′s (the millenarian Taiping Rebellion), the 1930′s (Japanese occupation), and 1959-62 (the Great Leap Forward), each progressively smaller than the last in its relative magnitude. For instance, the latter just formed a short plateau.

Korotayev et al conclude the chapter by running statistical tests on China’s historical population figures from 57-2003. In contrast to linear regression (R^2 = 0.398) and exponential regression (R^2 = 0.685), the simple hyperbolic growth model described in “Introduction: Millennial Trends” produces an almost perfect fit with the observed data (R^2 = 0.968). So in the very, very long-term, the effects of China’s secular cycles are swamped by the millennial trend of hyperbolic growth.

Finally, the authors describe in-depth the general pre-industrial Chinese demographic cycle. Below is a functional scheme I’ve reproduced from the book (click to enlarge).

The main points are:

  • Fast population growth until it nears the carrying capacity, then a long period (100 years+) of a very slow and unsteady growth rate, accompanied by increasingly significant, but non-critical fluctuations in annual population growth due to climatic stochasticity (positive growth in good years, negative growth – along with dearth, minor epidemics, uprisings, etc – in bad years). These fluctuations get worse with time as the state’s counter-crisis potential degrades due to the drawdown of previously accumulated surpluses.
  • According to Nefedov’s model and historical evidence, the fastest growth of cities occurred during the last phases of demographic cycles, as peasants were driven off the land and there appeared greater demand for city-made goods from the increasingly affluent landowners (who could charge exorbitant rates on their tenants). Furthermore, some peasants are drawn into debt bondage because the landowner had previously given them food at a time of dearth. Other peasants turn to banditry.
  • Re-”elite overproduction → over-staffing of the state apparatus → decreasing ability of the state to provide relief during famines”. The system of state relief had been very effective earlier, e.g. in 1743-44 a state effort to prevent starvation in the drought-stricken North China core was successful. However: “By Chia-ch’ing times (1796-1820) this vast grain administration had been corrupted by the accumulation of superfluous personnel at all levels, and by the customary fees payable every time grain changed hands or passed an inspection point… The grain transport stations served as one of the focal points for patronage in official circles. Hundreds of expectant officials clustered at these points, salaried as deputies (ch’ai-wei or ts’ao-wei) of the central government. As the numbers of personnel in the grain tribute administration grew and as costs rose through the 18th century, the fees payable for each grain junk increased [from 130-200 taels per boat in 1732, to 300 taels in 1800, and to 700-800 taels by 1821]“. Similarly, the Yellow River Conservancy, whose task it was to prevent floods, degenerated into hedonistic corruption in the early 19th century; only 10% of its earmarked funds being spent legitimately.
  • So what you have is an increasingly exploited peasantry, a growing (and volatile) urban artisan class – e.g., the sans-culottes of the French Revolution, and more banditry. The bandits create a climate of fear in the countryside and force more outmigration into the cities, and the abandonment of some lands. At the same time, state power – military and administrative – is on the wane, displaced by corruption. The effects of perturbations are magnified due to the system’s loss of resiliency. There eventually comes a critical tipping point after which there is a cascading collapse that involves a population dieoff, the fall of centralized power, and a prolonged period of internal warfare.
  • Fast population growth does not resume immediately after collapse because things first need to settle down.

In my Facebook Note, Musings on the decline and fall of civilizations, I draw a link between the fast population increase / abundance of the “rise” period, and the concept of the “Golden Age” common to all civilizations. Also ventures a theory as to why cities (hedonism, conspicuous consumption, etc) have such a poor reputation as a harbinger of collapse… because they are, it’s just that the anti-poshlost preachers haven’t identified the right cause (i.e. overpopulation, not “moral decadence” per se).

Furthermore, a tentative explanation of the reason for differential Chinese – European technological growth rates (compare and contrast with Jared Diamond’s explanation):

Incidentally, a possible reason why Western Europe emerged as the world’s economic hegemon by the 19th century, instead of China, a civilization that at prior times had been significantly more advanced. But in China, the depth of the Malthusian collapses was deeper and more regular (once every 300 years, typically) than in W. Europe… Once the Yangtze / Yellow River irrigation systems failed, tens of millions of peasants were doomed; nothing on an equivalent scale in Europe, which is geographically and politically fragmented into many chunks and nowhere has anywhere near the same reliance on vulnerable hydraulic works for the maintenance of complex civilization (control over water was at the heart of “Oriental despotism” (Wittfogel); the Chinese word “zhi” means both “to regulate water” and “to rule”).

This theory that the reason China began to lag behind Western Europe technologically was because of its more frequent collapses / destructions of knowledge should be explored further.

Finally, about the nature of perturbations in a closed system under increasing stress… That is our world in the coming decades: even as Limits to Growth manifest themselves, there will be more (and greater) shocks of a climatic, terrorist, and military nature. The stochasticity will increase in amplitude even as the System becomes more fragile. As a result, polities will increase the level of legitimization and coercion, i.e. they will become more authoritarian.)

Chapter 3: A New Model of Pre-Industrial Political-Demographic Cycles

To address the shortcomings of other models and taking into account what happens in typical pre-industrial demographic cycles, Korotayev with Natalia Komarova construct their own model that includes the following three main elements:

(1) The Malthusian-type economic model, with elements of the state as tax collector (and counter-famine reservoir sponsor), and fluctuating annual harvest yields; this describes the logistic shape of population growth. It explains well the upward curve in the demographic cycle and saturation when the carrying capacity of land is reached. (2) Banditry and the rise of internal warfare in time of need are the main mechanism of demographic collapse. Personal decisions of peasants to leave their land and become warriors / bandits / rebels are influenced by economic factors. (3) The inertia of warfare (which manifests itself in the fear factor and the destruction of infrastructure) is responsible for a slow initial growth and the phenomenon of the “intercycle”.

Reproducing the model in detail will take up too much space, so just the main conclusions: “the main parameters affecting the period of the cycle are a) the annual proportions of resources accumulated for counter-famine reserves, b) the peasant-bandit transformation rate, and c) the magnitude of the climatic fluctuations. Hence, the lengths of cycles – and this is historically corroborated – is increased along with the growth of the counter-famine (more reserves) and law-enforcement (repress banditry) subsystems.

Chapter 4: Secular Cycles & Millennial Trends

Full version of Chapter 4: Secular Cycles and Millennial Trends.

The chapter begins by modeling the role of warfare, and challenges recent anthropological findings that denser populations do not necessarily lead to more warfare.

  • First, this is explained by the fact that it’s not a simple relation, but more of a predator-prey cycle described by a Lotka–Volterra equation. When warfare breaks out in a time of stress it leads to the immediate reduction of the carrying capacity and demographic collapse; however, warfare simmers on well into the post-collapse phase because groups continue to retaliate against each other.
  • Second, the methodology is flawed because it treats all wars the same, whereas in fact they tend to be far less devastating for bigger polities than for small ones. This is because bigger polities have armies that are more professional, and the length of their “bleeding borders” relative to total territory, is much smaller than for territorially small chiefdoms, for whom even low-intensity wars are demographically devastating. As such, more politically complex polities fight wars more frequently more frequently than smaller ones, but tend to be far less damaged by them.
  • Imperial expansions in territory coincide with periods of fast population growth and high per capita surpluses; later on, shrinking surpluses decimate the tax base and even defense proves increasingly hard (“imperial overstretch”). This correlation is very strong.

Now Korotayev et al combine their model from the last chapter with Kremer’s equation for technological growth (see the Introduction):

dT/dt = a*N*T

They also model a “Boserupian” effect, in which “relative overpopulation creates additional stimuli to generate and apply carrying-capacity-of-land-raising innovations”.

Indeed, if land shortage is absent, such stimuli are relatively weak, whereas in conditions of relative overpopulation the introduction of such innovations becomes literally a “question of life and death” for a major part of the population, and the intensity of the generation and diffusion of the carrying capacity enhancing innovations significantly increases.

Finally, they make the size of the harvest dependent not only on climatic fluctuations, but also on the level of technology.

Harvest i = H 0*random number i*T i.

Running this model with some reasonable parameters produces the following diagram, which reproduces not only the cyclical, but also the hyperbolic macrodynamics.

Furthermore,

Note that it also describes the lengthening of growth phases detected in Chapter 2 for historical population dynamics in China, which was not described by our simple cyclical model. The mechanism that produces this lengthening in the model (and apparently in reality) is as follows: the later cycles are characterized by a higher technology, and, thus, higher carrying capacity and population, which, according to Kremer’s technological development equation embedded into our model, produces higher rates of technological (and, thus, carrying capacity) growth. Thus, with every new cycle it takes the population more and more time to approach the carrying capacity ceiling to a critical extent; finally it “fails” to do so, the technological growth rates begin to exceed systematically the population growth rates, and population escapes from the “Malthusian trap” (see Diagram 4.26):

The cycles lengthen, and then cease:

AK: some confirmation for my rough explanation of why Chinese technological growth rate fell below Europe’s prior to the Industrial Revolution (see end of Chapter 2 in this post).

Of special importance is that our numerical investigation indicates that with shorter average period of cycles a system experiences a slower technological growth, and it takes a system longer to escape from the “Malthusian trap” than with a longer average cycle period.

Finally, they also add in an equation for literacy:

l i+1 = l i*b*dF i*l i*(1 – l i)

Which has the following effect on population growth:

N i+1 = N i*(1 + α × dF’)*(1 – l) – dR i – rob*N i*R i

And all added together, it produces the following stunning reproduction of China’s population dynamics from ancient past to today.

And concludes:

Of course, these models can be only regarded as first steps towards the development of effective models describing both secular cycles and millennial upward trend dynamics.

The Meaning of Cliodynamics

Turchin, Peter & Sergey NefedovSecular Cycles (2008)
Category: cliodynamics, world systems; Rating: 5/5
Summary: Read the whole book (PDF) or in chapters

This is a free online, quasi-popular book about eight different pre-industrial secular cycles (including Tudor England, the Roman Empire, Muscovy, and the Romanov Empire). Knowing the facts of history and the proximate causes of Revolutions – Lenin’s charisma, Tsarist incompetence, the collapse of morale and of the railway system, etc – is all well and good, but an entirely different perspective is opened up when looking at late Tsarist Russia through a social macrodynamic prism. The interpretation shifts to one of how late imperial Russia was under a panoply of Malthusian pressure, and of how the additional stresses and perturbations of WW1 “tipped” the system over into a state of collapse.

Finally, my reply to someone who sent me a message suggesting that cliodynamics may “make old school idiographic history redundant”.

I don’t think these trends will make idiographic history redundant, because there are many elements that are irreducible to mathematical analysis; furthermore, a major and inevitable weakness of cliodynamics is our lack of numbers for much of pre-mass literacy history. To the contrary, I think cliodynamics will end up complementing the “old school” rather than displacing it.

Footnotes

* Ray Kurzweil, one of the high priest of the singularitarian movement, extends Moore’s observations to also model technological growth (computing power, to be precise) as doubly exponential, or even hyperbolic. See Appendix: The Law of Accelerating Returns Revisited,

On the other hand, Joseph Tainter noted that in many areas the rate of technological innovation is actually slowing down. This is an argument that Kremer’s assumption that the rate of technological growth is linearly dependent on the product of the population and the size of the already-existing technological base is too simplistic.

These observations are supported by Planck’s Principle of Increasing Effort – “with every advance [in science] the difficulty of the task is increased” (i.e. you’re now unlikely to make new discoveries by flying a kite in a thunderstorm). Furthermore, “Exponential growth in size and costliness of science, in fact, is necessary simply to maintain a constant rate of progress”, and according to Rescher, “In natural science we are involved in a technological arms race: with every ‘victory over nature’ the difficulty of achieving the breakthroughs which lie ahead is increased”.

(Republished from Sublime Oblivion by permission of author or representative)
 
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The classic Marxist argument holds than an emerging bourgeois class, its wealth based on commerce, industry and capital accumulation, was constrained and frustrated in its political ambitions by the nobility. France was divided into Three Estates, the Third Estate which bore the taille (the main direct tax), the nobility (subject only to the capitation poll tax and viengtième) and the clergy (only required to donate a pre-negotiated don gratuit). The ‘privileged’ orders maintained monopolies, held the right to collect the tithe or seigniorial dues and enjoyed many exemptions, e.g. on military service, the corveé and most taxes. L.S. Mercier in his Tableau de Paris succinctly summed up the many grievances against the aristocracy – “The castles…possess misused rights of hunting, fishing and cutting wood…[and] conceal those haughty gentlemen who separate themselves effectively from the human race…who add their own taxes…beg eternally for pensions and places…[and] will not allow the common people to have either promotion or reward”. The last point was expounded on by the Abbé Sieyès, in the heady atmosphere of 1789, when he wrote, “All the branches of the executive have been taken over by the caste that monopolizes the Church, the judiciary and the army. A spirit of fellowship leads the nobles to favor one another over the rest of the nation”. These illustrated the main complaints of the Third Estate against the nobility – they were perceived as venal, reactionary and parasitic, a foreign blot on the French nation.

Yet the above view that 18th century France saw the bourgeoisie superseding the old nobility economically but being frustrated in their social ambitions by them is a flawed and simplistic narrative. The arguments of the revisionist school, which challenged the French Marxist interpretation of the Revolution as the replacement of the nobility by the bourgeoisie as the dominant class, are many and covering all major revisionist historians (Cobban, Taylor, Doyle, etc) is futile in an essay of such length. However, Schama’s Citizens encompasses their arguments in one book, albeit one we have to treat with caution due to its constant and unwarranted bias against the revolutionaries, harkening back to historical dramatizers like Carlyle, Dickens and Baroness Orkzy.

In a nutshell, Citizens considers the old regime to have been surprisingly modern – progressive, prospering, addicted to science and change. Old-style feudalism was supposedly already pretty much vanished from the countryside – most dues were equivalent to money rents. French state-funded pure science was the equal of any in Europe and was translated into many useful applications, particularly in military technology. Economic growth proceeded at 1.9% per annum in the late 18th century, a rate only matched during the era of the Empire and its artificial Continental System. Transport (from 1760 to 1780 travel times by coach from Paris to Bordeaux fell from fourteen to five days), communications and trade) were developing rapidly, unifying the French market. Industry burgeoned, growing at an impressive average of 3.8% per annum from the 1760′s to the Revolution) and was the most developed in Europe outside Britain. Growing literacy and the rise of a public opinion fueled an explosion in newspapers, pamphlets and encyclopedias.

Also incorporated is Doyle’s insight that by the late 18th century, nobility could be easily bought (France had 120,000 nobles in 1789, an order of magnitude greater than in Britain) and that the late ancien régime underwent fusion between the aristocracy and the bourgeoisie. While officially engagement in commercial activities was to be punished by derogation, in practice France’s leading industrialists were also nobles – for instance, the Duc d’Orléons, the King’s own brother, owned glass-works at Cotteret and textile plants at Montargis and Orléons. Such examples could be multiplied indefinitely. Moreover, the biggest frictions were not between the commercial bourgeoisie and nobles, but between different sections of the nobility – the usually successful urban nobles of Paris and the booming peripheral cities like Lyons, Marseilles, Bordeaux and Nantes, and the rural gentry, which comprised 40% of the noble population and frequently had nothing to distinguish themselves from the commoners around them than by their titles, and thus had the most to fear from a loss of privileges. This was the main reason behind the 1781 Ségur Law, which limited sales of military ranks to the old nobility and was primarily aimed against the recently ennobled nouveau riche. Furthermore, there is evidence that even the more ordinary bourgeoisie (which number some 2.3mn souls on the eve of the Revolution) admired and aspired to nobility – for instance, in December 1788 the lawyers of Nuits declared, “The privileges of the nobility are truly their property. We will respect them all the more because we are not excluded from them…why, then, suppose that we think of destroying the source of emulation which guides our labors?” For every corrupt and unpopular intendant there would be a progressive like Saint-Sauveur in Languedoc, who applied science to solve economic and public health problems in his province. To quote Schama in extenso, assuming modernity to be a “world in which capital replaces customs as arbiter of social values, where professionals rather than amateurs run the institutions of law and government, and where commerce and industry rather than land lead economic growth”, the “great period of change was not the Revolution but the late eighteenth century”.

So instead of being a class war between bourgeoisie and nobility, there is evidence that it was ideas, a reaction against this brave new world of ‘money and death’, that generated the Revolution. This new social phenomenon was based on several sources – foremost, philosophy and reviving interest in antiquity, all reinforced by the decline of absolutism throughout the eighteenth century and the rapid spread of literacy. Louis-Philippe, the Comte de Ségur, recalled in 1826 – “We were inclined to surrender whole-heartedly to the philosophical doctrines put forwards by men of letters…we took secret pleasure in the fact that these men attacked the old edifice that seemed to us to be so Gothic and ridiculous. Censorship in the last decades of the ancien régime was relatively light and forbidden books and pamphlets could be bought even near the entrance to the Palace of Versailles, where they found willing customers amongst the aristocrats and courtiers who as often as not were the subjects of their vitriol and ridicule. Rousseau captivated people with his aspiration to candidness, simplicity and Virtue; Voltaire criticized the bloated upper hierarchy of the Church; Montesquieu proposed the division of government into the legislative, executive and judicial branch, replacing the old feudal system of the Estates. In general invective was directed against the system of monarchical rule – writing the Rights of Man in 1791, Tom Paine summarized these sentiments by stating that “what is called the splendor of a throne is no other than the corruption of the state, which “indiscriminately admits every species of character to the same authority”.

A renewed interest in the ancient world stirred ascetic Roman ideals of asperity, simplicity and readiness to sacrifice, as exemplified by the tale of the Horatii (which inspired the famous David painting, Oath of the Horatii). Modern manifestations of the Roman ideal were seized upon, as illustrated by the emergence of patriot citizen heroes during the French involvement in the American Revolutionary War (against a monarchy!) – e.g. du Couëdic, a ship commander who became a patriot hero after his Pyrrhic victory over a British frigate in which he was mortally wounded and his sloop practically destroyed. And finally there was the reflection of these ideas in the popular culture of the time – plays caricaturing the privileged orders (e.g. The Marriage of Figaro), David’s paintings and the polemics of folks like Mercier and Linguet. Thus as we can there was more to the background of the Revolution that social and economic turbulence – also playing a great rule were new ideas like equality of opportunity, the virtues of simplicity and patriotism, and a return to an imagined past while being propelled forwards technologically – as gushingly envisioned in Condorcet’s futurist writings.

The other side of the Marxist argument is that, in Albert Soboul’s words, “The French Revolution was the crowning achievement of a long economic and social evolution that made the bourgeoisie the master of the world”. He has a point regarding his evaluation of the Revolution’s lasting legacy – in particular, that of its Constituent Assembly. The Declaration of the Rights of Man (1789) was the foundation for civil equality – Clause 2 states, “These [natural and inalienable] are liberty, property, security and resistance to oppression”. Guilds and price controls were abolished and the Le Chapelier Law (1791) prohibited workers’ associations. That said, many of the liberal reforms of that era were simply a continuation of previous royal policies. The main Revolution-inspired tax, a common one on land and movables, had precedents in Calonne’s reform proposals of 1786 and free trade was in favor from Turgot to the Eden Treaty. The removal of internal customs barriers and the emancipation of Protestants both happened in 1786 under the ancien régime.

The Revolution opened up careers to talent, which could only favor the bourgeoisie since urban workers and peasants did not have the educational opportunities to exploit this. However, in the short term, because of the Revolution’s distrust of professional associations (links to old regime corporatism and privilege), medicine and law were “thrown open to the market, with minimal qualifications required”, resulting in “revolutionary France being a happy hunting ground for quacks and charlatans”. Afterwards, the militarized bureaucracy that was the Napoleonic state employed 250,000 officials, five times more than the old regime and about 10% of the entire bourgeoisie, who even enjoyed the rudiments of a contributory pension system. The army was very successful in adapting to the new society, as Napoleon could testify. So the bourgeoisie, as in middle class, gained authority – but what about the other meaning of bourgeois, as in capitalist?

The Revolution affirmed property rights and produced aforementioned pro-capitalist legislation. However, in the short term it was a catastrophe – war and British naval superiority, coupled with revolts in the provinces led to the eclipse of France’s most dynamics economic sector in 1789, overseas trade, as well as the cities that sustained it (Bordeaux, Marseilles, Nantes, etc). Emigration and persecution of the old noble elites caused the collapse of Lyon’s silk industry. Granted, military campaigns and the Continental System created artificial demand for cotton and metallurgy, but these also collapsed following the defeats after 1812. From a long term perspective, the ruling class remained confined to land-owning nobles and bourgeoisie as before, who invested in land rather than industry, especially because of the mass sale of the biens nationaux – for instance, one asked what kind of Frenchman is mad enough “to risk his fortune in a business enterprise…[and not]…one of the confiscated estates”. France had to wait for the railways to really ‘take-off’ into its industrial revolution and its main impact, meanwhile, was in its ideas – nationalism, civil equality, sovereignty and meritocracy, which were born in the last decades of the ancien régime and propagated through Europe by French armies. “The people thought kings were gods upon earth…[now] it’s more difficult to rule the people”, according to Kolokotrones, a Greek brigand and patriot.

Following our analysis of the origins and results of the Revolution – in which we say that although its repercussions did impact somewhat on the social structure, the main motivations seem to have been based on ideas, not class – it’s time to look at course of the Revolution itself. The first and most famous French Revolution was, according to Lefebvre, actually four revolutions. The first was the ‘aristocratic revolt’, which, due to circumstances and Louis XVI’s indecisiveness and assorted gaffes, succeeded in calling up the Estates-General to approve new taxes. However, the privileged Estates’ insistence on the ‘forms of 1614′ transformed the debate – “King, despotism and constitution have become only secondary questions. Now it is war between the Third Estate and the two others”, according to the Abbé Sieyès. Eventually though, faced with deadlock and ominous signs from the government, they joined in common with a doubled Third and took the Tennis Court Oath. The popular revolution stormed the Bastille, took control of Paris and destroyed the capital’s hated customs wall on hearing rumors of a royalist plot to dissolve the National Assembly by force. Meanwhile the peasant revolution destroyed feudalism from below via the widespread burning of seigniorial obligations. The King was forced to back down. With its newfound power, the bourgeoisie used the National Assembly to enact Enlightenment-influenced civil equality reforms.

The above account is not as simply as it might appear. The composition of the Third Estate in the Estates-General of 1789 was actually mostly composed of venal office holders (43%) and lawyers (25%), while only 13% were involved in commercial activities. Furthermore, the Third was actually more conservative than the Second on the vast majority of economic and social issues! Also the Estates were prepared to fuse together into a National Assembly to demand a constitution and afterwards, all (former) orders overwhelmingly supported measured to eradicate privileges (e.g. the August Decrees).

The other major period as regards social interpretations is from the purge of the Girondins in June 1793 to the Thermidorian reaction in July 1794. Now the legacy of this period – the Maxima, forced loans, laws against hoarding, the Vendôme Laws – is certainly not pro-bourgeois under any understanding of the term. According to a variant of the Marxist interpretation, the bourgeois bent over backwards to appease the sans-culottes by implementing economic Terror. In this way war pressures (the levée en masse and its associated release of democratic sentiments), food shortages and radicalization of the clubs (e.g. Cordeliers) was to be sublimated and redirected against the Republic’s foreign enemies.

The problem with this interpretation is the assumption that the sans-culottes had a powerful political identity and goals of their own. They were in fact politically passive. They did not lash out when their champions were destroyed (e.g. Roux imprisoned under the Law of Suspects in September 1793, the Hébertists guillotined for their excessive zeal in March 1794, etc). All their journées during the period – the overthrow of the King, the purge of the Girondins, demands for the Maxima – were in any case supported by a large number of Assembly deputies. Finally, they faded as a political force after Thermidor once the war started going much better, despite the winter of 1794-95 being one of the harshest on record and rampant inflation following the abandonment of the Maxima. This is illustrated by the failed uprisings of Germinal and Prairial. One cause of this is that the “popular societies of the sections rarely numbered more than 400 members”, meaning that only 5% to 10% of Parisians actively participated (and were mainly drawn from artisans and shopkeepers), in contrast to the sectional battalions which numbered around 100,000 men. Thus they were too weak without the support of bourgeois Jacobinism. They defined themselves culturally (not politically) as favoring fraternity, liberty and candidness, and in opposition to the corrupt, superficial ‘aristos’. It wasn’t really a class with common social backgrounds, but rather an intellectual and cultural fad which predated the worker movements of the 19th century, e.g. in its politicized social goals and partial tolerance of a feminist movement.

Although in general the Jacobins shared moderately well-off bourgeois backgrounds, what defined them were their ideas. Robespierre dreamed of a Rousseaun Republic, a Romantic vision of Virtue as absolute end. But “virtue without which terror is harmful and terror which without virtue is impotent” – political Terror was necessary for the preservation of the Republic from its internal enemies and to inculcate virtue. Rationality, incorruptibility, candidness, the Supreme Being were virtue – and those who dared stand against it (Hébertists, dechristianizers, feminists, Enragés, etc) were to be smitten down by the guillotine. Even as the Convention passed Saint-Just’s Vendôme Laws (the transferal of the lands of émigrés to landless French patriots), the deportation of French vagrants to Madagascar was being seriously discussed. Furthermore, it was more about “punishing political crime and rewarding political virtue” than any social consideration, especially considering it “[only appeared] as an appendage to a prolonged denunciation of disloyalty”. The Thermidorian reaction was a grouping of republican moderates intent on ending the Terror, and consequent reprisals against the Terrorists were a matter of vengeance, not class war, since they were almost all bourgeois themselves.

While the Marxist view of the Revolution as a social struggle (transition from feudalism to capitalism) is useful in analyzing social changes between 1789 and 1799, it is bankrupt as an explanation for why tendencies already embedded in ancien régime France erupted so suddenly and violently. It was an unqualified boon only for landed middle-class bourgeoisie who were focused on a career of state service, but was disastrous for those in commerce (at least in the short-term). In general the bigwigs of the nobility retained their positions, and social conditions worsened for the urban poor because of the much reduced influence of the Church, which had been the main system of social support in the old regime. Amazingly, despite population increase, the number of hospitals in 1847 was 42% less than in 1789. However this was in a sense just an acceleration of late 18th century trends, when worker incomes plunged, economic inequality soared and the system was increasingly decried by polemicists like the doom-mongering Mercier. French reality fermented with the intellectual revolution of the Enlightenment to produce a social and above all an intellectual one. It was a revolution primarily inspired and fueled by ideas – not by class conflict.

(Republished from Sublime Oblivion by permission of author or representative)
 
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Sometimes, it is much simpler to expound upon one’s views on a subject by replying to and arguing against an opposing view, rather than constructing one’s own thesis. Call it intellectual laziness, a clever short-cut or whatever you not, this is what I’m going to do with the Washington Post article A Long Wait at the Gate to Greatness, in which John Pomfret argues that China is unlikely to ever match, let alone surpass, the United States as the world’s premier superpower. I will quote it in full, adding my own comments:

Nikita Khrushchev said the Soviet Union would bury us, but these days, everybody seems to think that China is the one wielding the shovel. The People’s Republic is on the march — economically, militarily, even ideologically. Economists expect its GDP to surpass America’s by 2025; its submarine fleet is reportedly growing five times faster than Washington’s; even its capitalist authoritarianism is called a real alternative to the West’s liberal democracy. China, the drumbeat goes, is poised to become the 800-pound gorilla of the international system, ready to dominate the 21st century the way the United States dominated the 20th.

The key difference is that China is a demographic giant. This means that to match the US in gross GDP (one of the key criteria for superpower status), it need only advance to around a quarter of its per capita development, or Mexico’s level. To match the West (and be double the US), it need only reach Portuguese standards.

Except that it’s not.

Ever since I returned to the United States in 2004 from my last posting to China, as this newspaper’s Beijing bureau chief, I’ve been struck by the breathless way we talk about that country. So often, our perceptions of the place have more to do with how we look at ourselves than with what’s actually happening over there. Worried about the U.S. education system? China’s becomes a model. Fretting about our military readiness? China’s missiles pose a threat. Concerned about slipping U.S. global influence? China seems ready to take our place.

But is China really going to be another superpower? I doubt it.

China’s positive portrayal is far from universal. To the contrary, it’s possible to find a great many articles like his claiming that China’s rise is overblown, e.g. Will Hutton on Does the future really belong to China? (no, it doesn’t, according to him).

Too many constraints are built into the country’s social, economic and political systems. For four big reasons — dire demographics, an overrated economy, an environment under siege and an ideology that doesn’t travel well — China is more likely to remain the muscle-bound adolescent of the international system than to become the master of the world.

Let’s see how well he backs up this thesis.

In the West, China is known as “the factory to the world,” the land of unlimited labor where millions are eager to leave the hardscrabble countryside for a chance to tighten screws in microwaves or assemble Apple‘s latest gizmo. If the country is going to rise to superpowerdom, says conventional wisdom, it will do so on the back of its
massive workforce.

However, there is a very big hitch in the aforementioned conventional ‘wisdom’. According to the World Bank’s report Unleashing Productivity, the overwhelming majority of Chinese growth can be attributed to increasing total factor productivity and investment from 1999 to 2005. If labor supply hadn’t increased, China’s growth rate would have fallen by less than 1% point. Furthermore, China has experienced very high human capital accumulation, as nine-year schooling has become universal and “during the past decade, China has produced college and university graduates at a significantly faster pace than Korea and Japan did during their fastest-growing periods”; since education is the elixir of growth, its workforce won’t just be assembling gizmos and tightening screws for long. Even now higher-added value manufacturing is booming.

But there’s a hitch: China’s demographics stink. No country is aging faster than the People’s Republic, which is on track to become the first nation in the world to get old before it gets rich. Because of the Communist Party’s notorious one-child-per-family policy, the average number of children born to a Chinese woman has dropped from 5.8 in the 1970s to 1.8 today — below the rate of 2.1 that would keep the population stable. Meanwhile, life expectancy has shot up, from just 35 in 1949 to more than 73 today. Economists worry that as the working-age population shrinks, labor costs will rise, significantly eroding one of China’s key competitive advantages.

Firstly, a TFR of 1.8 is far from critical and kept constant will lead to only small declines in the size of succeeding cohorts. Secondly, according to most projections the absolute size of the labor force will nonetheless continue growing until 2030 (it also neglects the fact that the supply of excess labor from agriculture is far from drying up). Thirdly, it ignores the extend to which rising labor costs will be offset by rapidly growing productivity as much more resources can be invested in a smaller pool of children.

Finally, I strongly recommend reading the third chapter of the Goldman Sachs BRICs and Beyond book, Will China Grow Old Before Getting Rich?, for a refutation of this particular variant of the demographic-apocalypse myth.

Worse, Chinese demographers such as Li Jianmin of Nankai University now predict a crisis in dealing with China’s elderly, a group that will balloon from 100 million people older than 60 today to 334 million by 2050, including a staggering 100 million age 80 or older. How will China care for them? With pensions? Fewer than 30 percent of China’s urban dwellers have them, and none of the country’s 700 million farmers do. And China’s state-funded pension system makes Social Security look like Fort Knox. Nicholas Eberstadt, a demographer and economist at the American Enterprise Institute, calls China’s demographic time bomb “a slow-motion humanitarian tragedy in the making” that will “probably require a rewrite of the narrative of the rising China.”

In other words, just a little more than Japan’s rate (22%) today. Nothing particularly alarming. So what if the share of the working age population drops from 71% today to around 60% in half a century? Especially in an ever wealthier world where old people get ever healthier?

Regarding pensions, he answers his own question. They won’t be a problem because they generally don’t bother with them. (As a matter of fact, the lack of pensions partly explains China’s huge savings rate).

As for Eberstadt, I don’t put much stock into what he says, given the apocalyptic rhetoric he has spewed on Russia which I covered in the Demographics post on Da Russophile.

I count myself lucky to have witnessed China’s economic rise first-hand and seen its successes etched on the bodies of my Chinese classmates. When I first met them
in the early 1980s, my fellow students were hard and thin as rails; when I found them again almost 20 years later, they proudly sported what the Chinese call the “boss belly.” They now golfed and lolled around in swanky saunas.

But in our exuberance over these incredible economic changes, we seem to have forgotten that past performance doesn’t guarantee future results. Not a month goes by without some Washington think tank crowing that China’s economy is overtaking America’s. The Carnegie Endowment for International Peace is the latest, predicting earlier this month that the Chinese economy would be twice the size of ours by the middle of the century.

There are two problems with predictions like these. First, in the universe where these reports are generated, China’s graphs always go up, never down. Second, while the documents may include some nuance, it vanishes when the studies are reported to the rest of us.

Opinion presented as fact.

One important nuance we keep forgetting is the sheer size of China’s population: about 1.3 billion, more than four times that of the United States. China should have a big economy. But on a per capita basis, the country isn’t a dragon; it’s a medium-size lizard, sitting in 109th place on the International Monetary Fund‘s World Economic Outlook Database, squarely between Swaziland and Morocco. China’s economy is large, but its average living standard is low, and it will stay that way for a very long time, even assuming that the economy continues to grow at impressive rates.

As I mentioned, to fulfil what is perhaps the most important criterion for superpowerdom, China’s population size means it only has to reach about a quarter of America’s per capita development level to qualify – something it is already, by some measures, quite close to doing.

Secondly, the gap in development actually means China has the means to continue to ‘catch-up’ rapidly, since it’s much easier to grow fast when you lag far behind best practice. And unlike Morocco or Swaziland, which have yet to come close to conquering illiteracy, China possesses a basically well-educated population that is capable of absorbing higher-productivity technologies to convergence.

The big number wheeled out to prove that China is eating our economic lunch is the U.S. trade deficit with China, which last year hit $256 billion. But again, where’s the missing nuance? Nearly 60 percent of China’s total exports are churned out by companies not owned by Chinese (including plenty of U.S. ones). When it comes to high-tech exports such as computers and electronic goods, 89 percent of China’s exports come from non-Chinese-owned companies. China is part of the global system, but it’s still the low-cost assembly and manufacturing part — and foreign, not Chinese, firms are reaping the lion’s share of the profits.

And this matters how? Innovation and global brands are the next stage of development; for now, rapid build-up of industrial capacity, infrastructure and human capital is paramount, and something China is succeding at marvelously.

When my family and I left China in 2004, we moved to Los Angeles, the smog capital of the United States. No sooner had we set foot in southern California than my son’s asthma attacks and chronic chest infections — so worryingly frequent in Beijing — stopped. When people asked me why we’d moved to L.A., I started joking, “For the air.”

China’s environmental woes are no joke. This year, China will surpass the United States as the world’s No. 1 emitter of greenhouse gases. It continues to be the largest depleter of the ozone layer. And it’s the largest polluter of the Pacific Ocean. But in the accepted China narrative, the country’s environmental problems will merely mean a few breathing complications for the odd sprinter at the Beijing games. In fact, they could block the country’s rise.

The problem is huge: Sixteen of the world’s 20 most polluted cities are in China, 70 percent of the country’s lakes and rivers are polluted, and half the population lacks clean drinking water. The constant smoggy haze over northern China diminishes crop yields. By 2030, the nation will face a water shortage equal to the amount it consumes today; factories in the northwest have already been forced out of business because there just isn’t any water. Even Chinese government economists estimate that environmental troubles shave 10 percent off the country’s gross domestic product each year. Somehow, though, the effect this calamity is having on China’s rise doesn’t quite register in the West.

Actually this is the one point I somewhat agree on.

What I’d like to point out though is that these are not terminal factors which will prevent China’s rise, just an inconvenience. South Korea also had an extremely polluted environment in its industrial growth period (and to an extend, still does), but this didn’t stop it developing quickly and now that it’s rich it can devote more resources to environmental protection.

The real danger I see is that the Himalayan glaciers melt due to global warming and the great rivers that sustain Chinese (and Indian) civilization dry up. This will indeed probably pre-empt Chinese superpowerdom. Minor things like a bit of smog or increased water stress won’t.

And then there’s “Kung Fu Panda.” That Hollywood movie embodies the final reason why China won’t be a superpower: Beijing’s animating ideas just aren’t that animating.

In recent years, we’ve been bombarded with articles and books about China’s rising global ideological influence. (One typical title: “Charm Offensive: How China’s Soft Power Is Transforming the World.”) These works portray China’s model — a one-party state with a juggernaut economy — as highly attractive to elites in many developing nations, although China’s dreary current crop of acolytes (Zimbabwe, Burma and Sudan) don’t amount to much of a threat.

But consider the case of the high-kicking panda who uses ancient Chinese teachings to turn himself into a kung fu warrior. That recent Hollywood smash broke Chinese box-office records — and caused no end of hand-wringing among the country’s glitterati. “The film’s protagonist is China’s national treasure, and all the elements are Chinese, but why didn’t we make such a film?” Wu Jiang, president of the China National Peking Opera Company, told the official New China News Agency.

The content may be Chinese, but the irreverence and creativity of “Kung Fu Panda” are 100 percent American. That highlights another weakness in the argument about China’s inevitable rise: The place remains an authoritarian state run by a party that limits the free flow of information, stifles ingenuity and doesn’t understand how to self-correct. Blockbusters don’t grow out of the barrel of a gun. Neither do superpowers in the age of globalization.

Sounds more like an American triumphalist delusion than a realistic appraisal of how the world really works.

And yet we seem to revel in overestimating China. One recent evening, I was at a party where a senior aide to a Democratic senator was discussing the business deal earlier this year in which a Chinese state-owned investment company had bought a big chunk of the Blackstone Group, a U.S. investment firm. The Chinese company ha
s lost more than $1 billion, but the aide wouldn’t believe that it was just a bum investment. “It’s got to be part of a broader plan,” she insisted. “It’s China.”

I tried to convince her otherwise. I don’t think I succeeded.

I really fail how this is at all relevant. Perhaps it was just a commercial blunder; perhaps it was done for the purpose of acquiring American best practice. What could this possibly have to do with analyzing China’s future?

Well, to them, everything.

Washington’s political elites are filled with unease over the looming end of Pax America and the impending restructuring of the world economic and international order to one where regional powers like China, India and Russia become much more prominent and influential; the culmination of a macro-historical process that has only been accelerated by America’s fiscal profligacy, imperial overstretch and peak oil.

As such, their spokespeople, like Pomfret, try their best to deny the Emperor has no clothes, their arguments based on questionable assumptions and internally inconsistent. The US would be wise to reverse course and focus its energy on accomodating to the new multipolar world instead of trying to hyperventilate it away.

(Republished from Da Russophile by permission of author or representative)
 
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A while ago I wrote Education as the Elixir of Growth on DR, in which I noted that in most countries the educational profile is closely correlated to their level of productivity. The major exceptions are nations with resource windfalls (inflated productivity) and socialist legacies (deflated productivity). Furthermore, the greater the gap between the ‘potential productivity’, as suggested by the human capital level, and actual productivity, the greater will be the rate of economic convergence. This rate in turn depends on the openness of an economy (i.e. the rate at which it can absorb the latest know-how). Some countries, however, cannot converge to advanced industrial levels, since their human capital is set at a low level – they have reached an asymptote relative to the developed world and cannot converge without improving their educational profiles relative to the latter.

I have come across this article by Russian sociologist Andrei Korotayev, Reconsidering Weber: Literacy and the Spirit of Capitalism, which places the above into a long-term historical perspective. I will quote in extenso:

As has been mentioned earlier, human capital development has been suggested as one of the most important factors of economic growth, whereas education is considered to be one of the most important components of human capital (see, e.g., Schultz 1963, Denison 1962, Lucas 1988, Scholing and Timmermann 1988 etc.)…

In the 20th century mass literacy spread around the globe, and nowadays differences in literacy levels between different countries tend to disappear. At the same time, according to our hypothesis, the differences in economic developments of various countries are rooted in the period of the beginning of modernization era. Therefore, it seems reasonable to explore the connection between such indicators as GDP per capita at present and the literacy level in the early 19th century.

The data in Table 6.1 show that the level of economic wealth in the early 19th century in various regions did not differ greatly enough to be considered the leading factor of economic differentiation between the regions later on.

Diagram 6.1 shows that there is a strong and definitely significant linear correlation between the literacy rate in 1800 and GDP per capita at present. R2 coefficient indicates that this correlation explains 86% of the entire data dispersion.

Therefore, the hypothesis that the spread of literacy was one of the major factors of modern economic growth gains additional support. On the one hand, literate populations have many more opportunities to obtain and utilize the achievements of modernization than illiterate ones. On the other hand, literate people could be characterized by a greater innovative-activity level, which provides opportunities for modernization, development, and economic growth.

Literacy does not simply facilitate the process of perceiving innovation by an individual. It also changes her or his cognition to a certain extent. This problem was studied by Luria, Vygotsky, and Shemiakin, the famous Soviet psychologists, on the basis of the results of their fieldwork in Central Asia in the 1930s. Their study shows that education has a fundamental effect on the formation of cognitive processes (perception, memory, cognition). The researchers found out that illiterate respondents, unlike literate ones, preferred concrete names for colors to abstract ones, and situative groupings of items to categorical ones (note that abstract thinking is based on category cognition). Furthermore, illiterate respondents could not solve syllogistic problems like the following one – “Precious metals do not get rust. Gold is a precious metal. Can gold get rust or not?”. These syllogistic problems did not make any sense to illiterate respondents because they were out of the sphere of their practical experience. Literate respondents who had at least minimal formal education solved the suggested syllogistic problems easily (Luria 1974, 1976, 1982: 47–69).

Therefore, literate workers, soldiers, inventors and so on turn out to be more effective than illiterate ones not only due to their ability to read instructions, manuals, and textbooks, but also because of the developed skills of abstract thinking. Some additional support for this could be found in Weber’s book itself:

“The type of backward traditional form of labor is today very often exemplified by women workers, especially unmarried ones. An almost universal complaint of employers of girls, for instance German girls, is that they are almost entirely unable and unwilling to give up methods of work inherited or once learned in favor of more efficient ones, to adapt themselves to new methods, to learn and to concentrate their intelligence, or even to use it at all. Explanations of the possibility of making work easier, above all more profitable to themselves, generally encounter a complete lack of understanding. Increases of piece rates are without avail against the stone wall of habit. In general it is otherwise, and that is a point of no little importance from our view-point, only with girls having a specifically religious, especially a Pietistic, background” (Weber 1972: 75−6).

We believe that the above mentioned features of the behavior of German female workers in the late 19th−early 20th centuries simply reflects a relatively low educational level of German women from labor circles at that time. The spread of female literacy in Germany, as elsewhere, lagged behind that of male literacy (see Chapter 7). In the early 20th century the majority of women could write and read only in the most developed parts of Germany (Meliantsev 1996). More rational behavior of German workers from Pietistic circles could be easily explained by the special role of education in the lives of Protestants.

The ability to read was essential for Protestants (unlike Catholics) to perform their religious duty − to read the Bible. The reading of Holy Scripture was not just unnecessary for Catholic laymen, for a long time it was even prohibited for them. The edict of the Toulouse Synod (1229) prohibited the Catholic laymen from possessing copies of the Bible. Soon after that, a decision by the Tarragon Synod spread this
prohibition to ecclesiastic people as well. In 1408, the Oxford Synod absolutely prohibited translations of the Holy Scripture. From the very beginning, Protestant groups did not accept this prohibition. Thus, Luther translated in 1522–1534 first the New Testament, and then the Old Testament, into German, so that any German-speaking person could read the Holy Scripture in his or her native language. Moreover, the Protestants viewed reading the Holy Scripture as a religious duty of any Christian. As a result, the level of literacy and education was, in general, higher for Protestants not only than it was for Catholics and for followers of other confessions that did not provide religious stimuli for learning literacy (see, for example: Malherbe 1997: 139–57).

In our opinion, this could explain to a considerable extent the differences between economic performance of the Protestants and the Catholics in the late 19th − early 20th centuries in Europe noticed by Weber. One of Weber’s research goals was to show that religion can have independent influence on economic processes. The results of our study support this point. Indeed, spiritual leaders of Protestantism persuaded their followers to read the Bible not to support the economic growth but for religious reasons, which were formulated as a result of ideological processes that were rat
her independent of economic life. We do not question that specific features of Protestant ethics could have facilitated economic development. However, we believe that we found another (and probably more powerful) channel of Protestantism’s influence on the economic growth of the Western countries.

Literacy is a means of sharing information. Someone knowledgeable writes something (or not – but on average they will be more knowledgeable than the average reader on their subject, and in neural networks, that’s what matters), you read it and become more efficient at something, more productive. (It is not the only – another example would be speech, albeit the latter is much less intense and preservable.)

Looking back, the means of sharing ever larger amounts of information have been growing at a doubly exponential pace. Speech evolved a few tens of thousands of years ago. The first cuneiform tablets appeared in Mesopotamia a few thousands of years ago, and writing migrated to paper within that timeframe. The printing press appeared a few hundred years ago, first fitfully in China, then in Europe with gusto. The seeds of the Computer Age were sown in the past decades, and have since metamorphed into the information highway. Within several decades Singularitarians predict the occurence of such paradign shifts every few years, then months, then days, then seconds, unto and beyond the event horizon of our current world consciousness. Our universal history has been characterized by this one meta-narrative, of technological progress which proceeds at a doubly exponential pace, and of which the means of sharing information is a subset. (For the theory behind this observation, take a look at Korotayev’s Introduction: Millennial Trends).

And to peer into the future you need this kind of universal perspective. For even as in the decades ahead civilization’s material base is constrained and undermined by the limits to growth (resource depletion, catastrophic climate change, overpopulation), the electronic web will embrace the world ever tighter and ascent above it and float, lighter than air, even as the forests below wither away to reveal the desert of the real.

I am of the opinion that just as industrial take-off appeared first in the most highly literate countries and explains current international wealth disparities, so the key transformatory technologies of this century (nanotechnology, strong AI, etc) will be best utilized by those countries with the highest proportions of connected agents, netizens (as measured by Internet penetration, share of Top 500 supercomputers, spending on nanotechnology, etc). Even as the populations of these advanced regions gradually transcend, laggards will be stuck for a time in the (rapidly degrading) material world, just as in the nineteenth century the rest languished as the West made the world its oyster.

However, literati must precede digerati. The most networked countries also tend to be those which are best educated, like South Korea, Finland, Taiwan and the Netherlands. And in general education gives very good returns on investment. As such, in the name of egalitarianism and development, the flow of information must be made as free as possible so that as great a percentage of the world’s population could partake of the economic and spiritual benefits of the Singularity, as soon as possible. The maximum rate of catch-up of follower countries (developing) relative to leader countries (developed) in the nineteenth century was 1-2%; today, with improvements in transport and communications, it’s closer to 10% (see China). Imagine what it could be with the phenomenal bandwidths we’ll see in the decades to come! Unlike with the Industrial Revolution, or the Agricultural, this paradigm shift could in principle be a collective, universal human experience.

1. Abolish intellectual property. The main argument is that it won’t reward creators. I disagree. IP rights are a relatively recent Western development and great works of art and scientific progress has occured before the term was invented. Truly genuine artists and scientists do it out of altruism (a few) or a desire for recognition (the many), to satisfy their thymos, and monetary benefits are not the key factor.

2. Free information. The world’s libraries, universities and think-tanks should fling open the doors to their ivory towers, at least in the electronic world. People should be able to access the contents of courses on any subject, take the exams in them any time they want and following verification, get their degrees.

3. Universities should enter the modern world. For supposed bastions of enlightenment, universities are remarkably backwards today. In some people are expected to go to lectures and have qualified professors waste their time reading out elementary concepts in some subject or another to freshmen, when they could do it once, record it and post webcasts, and have students view it at their leisure, anywhere. They also tend to have Kafkaesque bureaucracies. Admittedly, at least on some fronts (access to course contents), trends are moving in a positive direction – but it is happening far too slowly.

4. Encourage denser networking and informatization in as many spheres as possible. Because crowds tend to be wiser than individuals and bio-metric data is more reliable and easier to procure (it’s always on you, duh!) than paper ID’s.

5. Encourage a culture of enlightenment. The state should do its utmost to ensure society respects intellectual culture instead of dissing it and invest the greatest resources into it, seeing as how it is the basis of long-term productivity growth and on a larger scale universal history itself. Shift the masses from materialistic concerns (mass consumerism) to a green civilization based on broad participation in scientific research and artistic endevours. Suppress factors that go against this culture (religion that tries to interfere in social and political life would be a prime target).

The countries that follow the above prescriptions and have the best pre-requisites (a solid educational profile – literacy, PISA scores, tertiary enrolment, etc – and a densely networked citizenry) will be at the forefront of those who will experience information takeoff – the new ‘leader’ countries, like as Britannia of industrial yore.

(Republished from Da Russophile by permission of author or representative)
 
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What are the reasons behind the wealth and poverty of nations? Since this question has exercised the minds of thinkers from Adam Smith to David Landes, Jared Diamond and Richard Lynn, I decided to take a look at it myself. I came to the conclusion that while geography, macroeconomic policies, resource windfalls and the microeconomic environment do play important roles, by far the most important factor is the state of a country’s human capital – things like literacy rates, school life expectancy and performance on international student assessments.

This is not a new idea. A Goldman Sachs report, Dreaming with BRICs, noted that:

Many cross-country studies have found positive and statistically significant correlations between schooling and growth rates of per capita GDP—on the order of 0.3% faster annual growth over a 30-year period from an additional one year of schooling.

However, I think education is much more central to this. The problem with using years of schooling as a yardstick is that in many middle-income countries, like Argentina, Turkey or Brazil, the amount of schooling is converging to that of the developed world, but the quality isn’t. This is attested to by their performance on international student assessments like PISA. For instance, in the 2006 PISA Science assessment, only 15.2% of Brazilians were at Level 3 or higher (the threshold for moving beyond purely linear problem-solving), compared with 47.6% of Russian, 51.3% of American and 66.9% of Australian students. Is it really then surprising to discover that from 1997 to 2007 purchasing power GDP per capita in Brazil and Russia, both medium-income countries, has grown at 1.3% and 6.0%, respectively, i.e., that Russia is playing the game of economic catch-up much more successfully?

I collected educational statistics on 65 countries and used a formula to work out a Human Capital Index (HCI), relying on three main stats – the literacy rate, PISA/TIMSS/PIRLS performance and tertiary attainment. I then compared this with their purchasing power GDP per capita and its average growth rate for 1997-2007. The results are in the table below.

Source: CIA World Factbook for literacy rates, GDP per capita, 2007 GDP per capita growth; PISA 2006 executive summary for Maths, Science, Reading stats (note: China, India are guessed); eighth-grade Maths, Science performance from Highlights from TIMSS 2003; fourth-grade Reading from PIRLS 2006; tertiary enrolment, 1997-2006 GDP per capita growth from World Bank. M1 and M2 refer to the mean of a country’s scores across PISA and TIMSS/PIRLS, respectively, divided by average across all participating countries; if there’s a figure for both M1 and M2, then M3 = (M1+M2) / 2; if not, M3 = M1 or M2, as appropriate. HCI = literacy * M3 * tertiary enrolment ^ (1/3). Figures in italics are those for which I’ve had to use other sources.

The chart below shows how closely educational capital and wealth correlate in 2007. We see an inverse square relationship or possibly a kind of S-curve with two inflection points.

Let us note a few things:

1. Notice that out of the 30 countries with an HCI below 0.80, with the marginal exception of Saudi Arabia, not a single one had a GDP per capita exceeding 20,000 $. In fact, this chart understates the pattern, because the detailed educational stats produced by programs like PISA and TIMSS typically don’t include low-income countries, where human capital is going to be typically very low.

2. Practically all outliers can be explained by one of two things – resource windfalls and socialist legacies. Among all countries with HCI’s of less than 0.80, the top outliers are all big oil or minerals exporters. This artificially inflates their GDP’s, varying in extent from Iran, South Africa and Mexico (where oil and minerals production co-exists with a burgeoning manufacturing base) to Saudi Arabia and Botswana (which are dominated by hydrocarbons and diamonds, respectively). The latter are green and the former are cyan/green. The reason Norway is the world’s most affluent country also comes down to the oil boost (its human capital is unremarkable by average OECD standards).

3. Similarly, the vast majority of low outliers come from the former Communist bloc. East European former satellites are red, post-Soviet countries are dark red and Russia is black. Note how far off the vast majority of them are from where their HCI seems to indicate they should be (the exceptions being Azerbaijan, the Czech Republic, Slovakia and to a lesser extent Bulgaria and Romania). Poland, Hungary and the post-Soviet world are currently well below their potential. The explanation is that these countries have spent much of this century languishing under central planning with all its inefficiencies and contradictions and thereafter being subjected to a decade-long period of brutal restructuring, before normal economic growth could again resume towards the mid to late 1990′s. Meanwhile, the Communist emphasis on education payed off bigtime, as human capital is comparable to that of much richer countries. It is worth noting also that the gap between potential and actual is greatest in the former Soviet bloc, presumably because the socialist legacy was strongest there (no folk memory of pre-WW2 capitalism, no Visegrad-like experiments with creeping capitalism, etc). The big exception is Azerbaijan, which has an oil windfall; Russia, the other country in a similar position, doesn’t replicate this because its potential (based on human capital) is much higher – its socialist legacy outweighs its resource windfall.

Below is a table with three indicators for each country – their actual GDP, potential GDP based on average macroeconomic/microeconomic policies and potential GDP based on optimal policies.

Potential and Actual GDP per capita (2007 $)
Actual Mean Potential
Max Potential
Georgia 4,200 15,000
24,000
Latvia 17,700 38,000
48,000
Moldova 2,200 17,000
26,000
Poland 16,200 33,000
44,000
Russia 14,600 35,000 49,000

4. There are five other low outliers – Slovenia, Taiwan, New Zealand, Finland and South Korea, of which the latter two are particularly big. The explanations aren’t as clear-cut here, but I’ll throw a few around. Finland is a northern country covered in permafrost that inflates construction, energy and transport costs, while New Zealand has a small population (i.e. a small market) far removed from the arteries of world trade. Slovenia has a socialist legacy. Taiwan and Korea are very densely populated, which impacts negatively on the productivity of the retail and construction sectors. Singapore is a top outlier, much richer than warranted by its human capital – I suppose that’s because of its status as a major trade hub. Not as convincing? I kind of agree. The above explanations do not have the all-encompassing unity and simplicity of the socialist legacy or the resource windfall. Which is why it’s time for us to talk about economic growth rates.

Speaking of which – see below.

Countries are marked by GDP / capita growth rates from 1997 to 2007. The colors go as follows: white (1.0-1.9%); yellow (2.0-2.9%); orange (3.0-3.9%); red (4.0-5.9%); dark red (6.0%-7.9%) and black (8.0%-14.9%). Also, GDP per capita figures (on the y-axis) are for 1997 – this is because what we are interested in is the influence of education levels on future growth, which we know for the period from 1997 up until today. Unfortunately, educational stats for 1997 will be much less comprehensive (PISA and TIMMS embraced much fewer countries then), plus it would take a lot of time digging them up – hence I made a rough assumption that they were the same as for 2007. Actually, the HCI is based on a collation of different stats from the 2000-2005 period).

One thing that immediately stands out is how countries that are below their potential tend to have much higher growth rates than those on or above their potential. In other words, excluding chaotic and cyclical trends, economies tend to a steady state depending on the level of their human capital. Thus, the blue and cyan groups above tend to have equal growth in GDP per capita (although since the population grows in most cyan countries, absolute GDP growth will be larger), meaning that the cyan countries aren’t converging and should not converge economically, no matter their degree of openness or transparency.

The most glaring exceptions are typically due to oil booms and the like, which not only increase GDP in of themselves but also fuel consumption splurges. The purple group is the most interesting, which mainly encompasses relatively well-educated post-Communist countries. Unshackled from the chains of socialism, they are now growing very quickly due to the huge ‘potential gap’ that exists between their human capital and development level. (Picture this as a question of heat diffusion – the greater the difference, the greater the pressure to close it). The green countries must massively increase their investment into education if they want to join the development bandwagon.

Now for some questions and answers:

What does this mean for development strategies?

Policy-makers must realize that education is the elixir of economic growth. Individual incomes grow due to the introduction of new technologies, which increase total factor productivity. (Granted, it is possible to increase labor participation rates and increase savings – but only up to a point. There are only so many people in any workforce, while investment is subject to diminishing returns. The only long-term development model is continuous technological adaptation, which is recognized by the exogenous growth model). However, a country’s ability to take advantage of technology diffusion is governed by its educational levels (e.g., the illiterate will have little need for a computer).

It is not enough, however, to enroll every annual cohort, give them ten years of public schooling and consider the task done, as is the pattern in much of the developing world today. School life expectancy in much of Latin America, the Middle East, South Asia and China might be drawing close to Western standards – the same cannot be said, however, for its quality, as these international student assessments reveal. Secondly, tertiary enrollment there (15-30%) remains far below Western and post-Communist standards (50-80%). To bridge the gap into society-wide participation in the ongoing technological revolutions, developing countries must make efforts to remedy the two above problems. Massive labor and capital infusions will only take you so far. Once a country achieves a GDP per capita of around 5,000 – 10,000$, growth becomes a matter of increasing productivity in the services and higher-tech manufacturing sectors. This requires annual cohorts of well-educated workers.

I am not denying that there are many other conditions that have to be fulfilled for economic convergence to happen. Goldman Sachs, for instance, has compiled a Growth Environment Index that takes into account thirteen factors: inflation, government deficits, external debt, investment, openness, years of schooling, life expectancy, political stability, rule of law, corruption and Internet, PC and telephone penetration levels. I think this approach misses the central point of development, however. An honest and well-run state simply reduces barriers to an economy reaching its maximum potential level of development; if the human resources are lacking, it will not converge to Western levels.

To illustrate this, let’s take a few middle-income countries, say, Chile and Estonia – both have solid macro-economics and perform respectably in rankings such as economic freedom, ease of doing business and corruption perceptions. Nonetheless, Chile’s per capita growth rate for the past ten years has been a sluggish 2.6%, compared to Estonia’s tigerish 7.7%. Why? I suspect it has something to do with Chile scoring 0.69 and Estonia 1.00 in my Human Capital Index. Russia, rarely cited as a paragon of economic freedom but with a good HCI of 0.94, outperformed Chile with growth of 6.0%. I suspect that the 1-2% difference from Estonia is due to the greater barriers to technology/productivity diffusion in Russia. (Incidentally, the reason the late USSR grew slowly was because its human capital was immensely burdened by the planned economy).

The same goes for the arguments of geographic determinism. Yes, being landlocked and frozen, or suffering the scourges of endemic debilitating diseases in tropical climes, tends to negatively affect development. I don’t see, however, how these disadvantages are different in quality from factors like macroeconomic incompetence or failing institutions.

How will this affect the world’s future?

In my previous Core Article Towards a New Russian Century?, I identified economic convergence, doubly exponential growth in IT and climate change as key drivers of world geopolitics in the decades ahead. On the topic of the former, I wrote:

Of course, it’s not sufficient merely to be behind to catch up. One must also have the human capital and physical infrastructure in place. One of the best proxies for human capital is education. Now as we can see from the info above, Russia’s (and eastern Europe’s) educational profile is of a First World character. Hence it is likely that the region’s impressive post-millennial growth will be sustained, resulting in convergence with west European countries by a 2020-30 time frame.

I stand by this prediction. According to the data, Latin America, the Middle East and South Asia all have educational systems that leave much to be desired, and little sign of fundamental change can be observed (there is no discernable improvement in Mexico’s and Brazil’s PISA scores from 2000 to 2006; tertiary enrolments in the above regions are increasing at a glacial pace).

India is still plagued by illiteracy and as late as 2005 a tenth of the youth cohort didn’t receive primary education, 43% didn’t receive secondary and only 11% received a higher-level education (an unimpressive over 6% in 1991), according to the World Bank. India will be a Great Power, but its few economic/technological centres will remain islands of prosperity amidst a sea of backwardness.

China has a decent school life expectancy, literacy rate and enrollment rates (universal primary and 74% secondary), but its tertiary enrollment ratio is low at 20% in 2005. (Nonetheless, it has increased very rapidly, from 3% in 1991, and if the experience of other countries is anything to go by, a concerted effort could see their rates rise to developed-country standards within the next twenty years). I have no idea how average Chinese students would score on the PISA tests (comparing them to Hong Kong or Macau is a pointless exercise, because of the vast disparity in development), so I guessed 420. If so, then China’s current 10% growth rates should soon moderate to around 5% – as my second graph shows, it is a) fast approaching its potential and b) it’s hampered by bureaucracy and corruption. Today most Chinese growth, unlike in east-central Europe, comes from infusions of labor and capital rather than productivity improvements – growth which could experience a severe and protracted slowdown once the surplus labor pool in the countryside is expended and investment rates are hit by a financial crisis, as happened with the other east Asian tigers after 1997.

In conclusion, China seems set to do considerably better than other developing regions of the world (Latin America, Middle East, South Asia and Africa), but will still be very far from converging to advanced industrial levels in 2025. Meanwhile, eastern Europe will converge with western Europe, while Finland, Korea and Estonia may become some of the richest countries in the world.

How did you work out the Human Capital Index?

Explained beneath the big table. Basically, literacy rate * international student assessment scores mean average * tertiary enrollment ^ (1/3). The reasoning is that a) you must be literate, at a minimum, to participate in a modern economy, b) international student assessments give a clue as to the quality of those who are educated (better than school life expectancy) and c) tertiary education improves human capital further, though not to the same absolute extent as elementary schooling – hence we take the cube root of that figure.

I am aware that in an ideal situation, we would make a sample representing everyone in the country take a skills test to gauge human capital; since we don’t have that luxury, we must rely on available statistics, two of which (test scores and tertiary enrolment) apply mostly to the newest cohorts entering those countries’ labor forces.

What has this got to do with Russia?

When I say things like “Russia will have a GDP per capita of 30,000$ by 2020″, I work by a set of assumptions and beliefs that may not be entirely clear to the casual reader of this blog, particularly the Russophobe variety which believes Russia’s economy is an oil bubble about to pop like a balloon. Which is understandable, given that the Western MSM’s discourse on Russia’s prospects is mostly negative.

Nonetheless, some facts must be acknowledged. The government since 1998 has handled the economy well, balancing inflation and ruble depreciation by maintaining fiscal discipline. Since 2006, they have embarked on large-scale basic (agriculture, housing, health and education) and strategic (nanotechnology, venture capital) investment programs. Yes, the bureaucracy is unwieldy, corruption is a problem and life is hard for small businesses, but as the last few years have showed, these problems are not fatal – at worst, they have shaved off 1-2% of annual GDP growth, and in any case the Baltics are the exception rather than the rule in the post-Soviet space. Most importantly, Russia’s human capital is of First World standards – and as we’ve argued here, this is the key component of development.

If anything, it would be exceptional if Russia didn’t converge to west European levels of development by the 2020′s.

(Republished from Sublime Oblivion by permission of author or representative)
 
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Anatoly Karlin
About Anatoly Karlin

I am a blogger, thinker, and businessman in the SF Bay Area. I’m originally from Russia, spent many years in Britain, and studied at U.C. Berkeley.

One of my tenets is that ideologies tend to suck. As such, I hesitate about attaching labels to myself. That said, if it’s really necessary, I suppose “liberal-conservative neoreactionary” would be close enough.

Though I consider myself part of the Orthodox Church, my philosophy and spiritual views are more influenced by digital physics, Gnosticism, and Russian cosmism than anything specifically Judeo-Christian.