Chartbook 450: Modern growth surges. Or, why China's economic development is unique in human history.

To the naked eye it is obvious that China’s spectacular growth surge from the late 1970s onward is the largest single transformation in world economic history. But how best to express and quantify this stark fact?

I’ve been spending a lot of time recently with the energy and climate question (Btw apologies for the newsletter slowdown. Normal service will resume in a few weeks time). The history of global coal consumption certainly tells a clear story.

Measured in coal, the history of our species falls into three phases. The first phase ran up to 1750, where the vast majority of human societies relied largely on a somatic, biological energy regime—firewood, human power, animal power. The second period stretched from the 1750s to the end of the 20th century. This was what we used to think of as the classic regime of industrialization, beginning with the industrial revolution of the 18^th century and ending with the world as it stood in the 1990s. Over two centuries, heavy industry spread outwards from its origins in 18th century North Western Europe, to North America and Eastern Europe and extending, in the 20th century, to Japan. This was the world that defined the first phase of global climate politics and its North-South politics, the world of the Noordwijk conference of Rio in 1992 and the Kyoto Treaty of 1997. It continues to define the imaginary of much writing about the climate question down to the present day, especially in the United States. On this historical arc, the clean energy transition goes hand in hand with deindustrialization, inspiring talk of a “weightless” economy. But that was, from a global perspective, a local experience. Globally, the opposite is the case. In the 2000s, quite suddenly, China’s coal consumption soared vertically upwards to reach levels never seen before in human history – four times greater than the USA at its peak.

Coal is a physical measure, what about GDP?

Branko Milanović in his The Great Global Transformation (Out right now and highly recommended) offers this intuitive comparison:

China has ‘exploded’: from producing 2 per cent of global output in 1974, its share has risen to 22 per cent in 2022. This was achieved by a prowess unrecorded in world economic history. Between 1978 and 2022, China has grown at an average (compounded) annual rate of 8.1 per cent per capita. Never in history have so many people improved their incomes so much over such a long uninterrupted period. To illustrate that, we can compare China’s rise to the case of Japan. In the Chinese case, we have more than a billion people (the average number of Chinese citizens during the period 1978–2022 was 1.23 billion), growing at 8.1 per cent per annum over forty-four years. A simple calculation (1.081) on the 44th degree multiplied by 1.23 billion gives a total gain of 38 billion (people/income) units. Japan, during its most successful period, 1952–91, produced income growth of approximately 105 million people over thirty-nine years at an average rate of 7.1 per cent per capita per annum. The same calculation gives in turn 1.9 billion people/income units, i.e. one-twentieth of what we obtain for China. Finally, a calculation for the United States over the period of its economic take-off between 1865 and 1914 yields an average annual growth rate of 1.3 per cent per capita for an average population of 63 million, and thus an overall gain of 0.13 billion units. In other words, the gains created during China’s extraordinary rise were of an altogether different order of magnitude compared to those of Japan and the United States during their economic take-offs.

Measured in terms of population-weighted-growth points, China’s growth was 20 times larger than that of boom-time Japan and more than 290 times larger than the growth of gilded age America.

This is a beguilingly simple measure that is, however, strictly relative. I.e. it operates in terms of growth rates not levels of GDP. It is a measure of how many people “moved”, how fast for how long.

What if we, instead, use absolute measures of GDP? To do this we can refer to the Angus Maddison data set of GDP and population. If we take the same periods as Milanović - 1978 to 2022 for China, 1953 to 1991 for Japan and 1865 to 1914 for the US - we can ask: how much did their respective growth add to national GDP?

For the US, over the period 1865 to 1914 total GDP increased by $738 bn at 2011 prices.

Japan’s growth surge between 1953 to 1991 added $3.5 trillion to GDP at 2011 prices.

For China over the period 1978 to 2022 the increase in GDP was $25.3 trillion.

Because China’s GDP in 1978 was so low, in absolute terms the increment to GDP from its growth was “only” 7.2 times larger than that added by Japan and 34 times larger than that of the US during its takeoff phase.

The point stands: the world has never seen anything like China’s growth explosion.

You get a somewhat different judgement, only if you place these inflation-adjusted absolute growth figures in proportion to overall global GDP growth over the relevant periods.

Over the half century from the American civil war to World War I, world GDP increased, according to rough interpolation from the Maddison data set, by something like $2.3 trillion. US growth accounted for about 30 percent of that.

Between the early 1950s and 1990 global GDP increased by $34 trillion at 2011 prices. Japan’s contribution to that surge came to just over ten percent.

What about China and the 21st century?

Over the forty years between 1980 and the early 2020s the increase in global GDP was $100 trillion. If we trust the Maddison data, global GDP more than quadrupled. Of that staggering increase, China accounted for roughly one quarter.

Which brings us back to where we started. Though in relative terms the growth of the US economy in the late 19th century made an outsized contribution to global growth somewhat greater than that China over the last forty years, the rate of growth and the absolute numbers were far lower. The world economy in the late 20th and early 21st century was far bigger and growing faster than in the late 19th century. In scale and velocity there is nothing in recorded economic history to compare with the impact of China’s recent development.

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