This graph doesn’t tell us what you think it does (Because stateness matters)

You probably saw this graph in your undergraduate development class — almost invariably as a demonstration of South Korea’s massive growth relative to countries that were allegedly at similar levels of “development” in the early 1960s.

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But were these countries really at the same level of development as South Korea?

The simple answer is no.

And to know why you need to read States and Markets: The Advantage of an Early Start:

A longer history of statehood might prove favorable to economic development under the circumstances of recent decades for several reasons. There may be learning by doing in the ways of public administration, in which case long-standing states, with larger pools of experienced personnel, may do what they do better than newly formed states. The operation of a state may support the development of attitudes consistent with bureaucratic discipline and hierarchical control, making for greater state (and perhaps more broadly, organizational) effectiveness. An experienced state like China seems to have been capable of fostering basic industrialization and the upgrading of its human capital stock even under institutions of government planning and state property in the 1960s and 1970s, whereas an inexperienced state like Mozambique sowed economic disaster when attempting to pursue similar policies a few years later. Such differences may carry over to a market setting — contrast, for instance, the late 20th century economic development of Japan and South Korea, modern countries with ancient national histories, with that of the Philippines, a nation that lacked a state before its 16th century colonization by Spain.

Development is not just about income. It also involves a lot of intangible socio-political variables. Going back to the graph, a key difference in 1960 between Ghana, India, and South Korea was the degree of coherent stateness. On this measure South Korea was way ahead of its developing country peers.

For more on this Dani Rodrik has a delightfully concise take on how South Korea and Taiwan grew rich.

Even within Africa, historical stateness makes a difference in development outcomes. A neat recent example can be found in Ethiopia’s ability to build a light rail in Addis in record time as Nigeria floundered.

reality check

Recently I have been reminded over and over again of the fact that in the sixties South Korea, Ghana, Kenya, the Congo etc had roughly similar per capita GDP (I just started reading economic gangsters and have attended two very interesting lectures by Francis Fukuyama). Assertions of this nature are usually accompanied by accounts of what happened post-60s that made South Korea several times richer than its African counterparts in the present day. But an equally important question to ask is how different pre-60s Korea was from the African countries? (Korea’s long history with some form of organized polity, the nature of Japanese colonization, geographic location near the economic giants Japan and the US, relative importance in cold war politics, etc etc).

These are real issues with real consequences. Briefly stated, the differences between say the Congo and Singapore extend beyond those between Lee Kwan Yew and Mobutu Sese Seko. Pre-independence history and realities (including culture and forms of socio-economic organization) played a significant role in determining the respective trajectories of the  post-independence states of Asia and Africa.

While I am not a believer in historical institutional determinism, I find the reality of findings such as this hard to ignore. The short of it all is that everything is endogenously determined – institutions, quality of leaders, rates of capital accumulation, savings etc etc.