Angus Maddison rewrites economic history again. - book review

Challenge, July-August, 2002 by Andrew Sharpe

ANGUS MADDISON'S NEW BOOK The World Economy: A Millennial Perspective (1) provides an amazingly rich Overview of world economic history. The volume updates and expands upon his earlier books Monitoring the World Economy, 1820-1992 (1995) and Chinese Economic Performance in the Long Run (1998). In my view, the book establishes Maddison as the leading macroeconomic historian of his generation.

The book is organized into three chapters and six appendixes. The first chapter discusses the contours of world development, looking at the nature and welfare implications of population change and long-term trends in GDP per capita. The second and longest chapter looks at the impact of Western development on the rest of the world from 1000 to 1950. Topics discussed include Europe's decline from the first to the tenth centuries, western Europe's recovery and forging ahead in the 1000-1500 period, the Venetian Republic, Portugal, the trading world of the Indian Ocean, China, Japan, arid the Philippines, the Portuguese in Brazil, the Netherlands, Britain, and the impact of British expansion on America, Africa, and Asia. The third chapter examines the world economy in the second half of the twentieth century, analyzing the economic performance of the advanced capitalist countries, resurgent Asia, West Asia, Latin America, the former Soviet Union and Eastern Europe, and Africa. The appendixes provide invaluable i nformation on world population, GDP, and GDP per capita2 for all parts of the world for very long time periods. Indeed, these data appendixes alone are worth the price of the book.

This article reviews a number of the key findings of the study. It examines the long-term evolution of the world leaders in GDP per capita; highlights new interpretations of economic history that come from Maddison's estimates of GDP per capita; outlines a number of interesting perspectives on the early economic history of the Western Hemisphere based on Maddison's population estimates; summarizes per capita GDP developments in the second half of the twentieth century in the underdeveloped countries and developments in the 1990s in the transition economies; highlights key productivity trends that emerge from Maddison's new data with respect to the countries of the Organization for Economic Cooperation and Development (OECD); and discusses the relevance to current policy-making of some of Maddison's findings.

The Quantification of World Economic History

Maddison is a great believer in quantification of economic history. He argues that it sharpens scholarly discussion, stimulates the development of rival hypotheses, and generally contributes to the dynamics of the research process. The key contribution of the volume to the literature is indeed Maddison's new comprehensive estimates of population, GDP, arid per capita GDP for the world economy over the past two millennia. He provides comparable estimates for literally all countries of the world for very long periods, going back to A.D. 0 for all major regions, to 1000 for most major countries, and to 1950 for literally all countries of the world except the former Soviet Union and eastern Europe, which are covered from 1973 to 1998. (3) These estimates are based on a massive and meticulous use of primary and secondary sources that are well documented in the volume.

Maddison's estimates of GDP per capita provide fascinating insights into the rise and fall of nations as world leaders in GDP per capita. His GDP per capita estimates back to 1500 allow the identification of world income leaders (Figure 1). During the first two-thirds of the sixteenth century (and before), Italy was the richest country in the world, with a GDP per capita of $1,100 (1990 international dollars), well above that of its closest rival, the Netherlands ($754). In about 1564, the Netherlands overtook Italy and remained the world leader until about 1836, a very long stretch. It was replaced by the United Kingdom. Two-thirds of a century later, around 1904, the United States replaced the United Kingdom as leader, a situation that continues today.

Maddison estimates that GDP per capita in 1000 was lower in western Europe ($400) than in Africa ($416), Asia excluding Japan ($450), and Japan ($425). Indeed, Maddison estimates that western Europe actually regressed during the first millennium, with per capita GDP down from $450 in A.D. 0.

In about 1500, western Europe started to grow, while the other parts of the world stagnated. Maddison explains the exceptionism of western Europe's long-run economic performance, which has continued to the present, by the West's superior technological progress. This includes the development of navigation, military technology, banking, accountancy, marine insurance, improvements in the quality of intellectual life with the development and spread of universities, and the introduction of the printing press.

With the divergence of growth paths after 1000, international inequality, as represented by the ratio of per capita GDP of the highest region to the lowest (Figure 2), has been on a more or less steady upward path. From a situation of almost world income equality in 1000 (1.1 1), the inequality ratio had reached 19: 1 by 1998. The inequality ratio fell only in the 1950-73 period, when per capita GDP growth in Asia excluding Japan (the region with the lowest per capita GDP) outpaced per capita growth in the western offshoots (the region with the highest GDP per capita).