The First East Asian Economic Miracle: Wages and welfare of urban ...

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The First East Asian Economic Miracle: Wages and welfare of urban workers in East Asia and Europe, 1880-1938
Jean-Pascal Bassino# and Pierre van der Eng
School of Management, Marketing and International Business College of Business and Economics The Australian National University Canberra ACT 0200 Australia
Paper to be presented at session 62 Factor and Commodity Prices: The Performance of the Less Industrialized Countries 1870-1939 XIV International Economic History Congress Helsinki, Finland, 21-25 August 2006
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This version: 14 June 2006 For discussion only. Please do not quote without the authors’ agreement Abstract How poor was Asia before World War II? The common perception is that living standards in Japan were lower than in Western Europe and even lower in other Asian countries. This study offers a comparison of nominal wages and welfare ratios for 1880-1938. It is based on price and wage data for six East Asian cities (Bangkok, Hanoi, Penang, Saigon, Singapore, and Tokyo) and three European cities (Madrid, Milan, and Paris). Welfare ratios of urban workers in Tokyo were lower than in Bangkok, and at times also lower than in other cities. The Euro-Asian comparison shows that by 1935 welfare ratios in Bangkok were comparable to those in Paris, while those in Saigon and Singapore were higher than in Milan. JEL classification: I310, J300, N350 Keywords: East Asian Economic Miracle, welfare, wages, savings, Japan, Southeast Asia
* This research has been initiated under the auspices of theAsian Historical Statistics Project(AHSTAT COE Project, supported by the Japanese Ministry of Education). Bassino gratefully acknowledges support by the French Ministry of Foreign Affairs (Maison Franco-Japonaisefellowship) and hospitality as visiting researcher at the Institute of Economic Research, Hitotsubashi University. Both authors thank Bob Allen, Loren Brandt, Kyoji Fukao, Debin Ma, Hironobu Nakagawa, Konosuke Odaka, Osamu Saito, Kaoru Sugihara and Jan Luiten van Zanden for comments and suggestions on earlier versions. The usual disclaimer applies. #E-mail of the corresponding author: jean-pascal.bassino@anu.edu.au
The First East Asian Economic Miracle: Wages and welfare of urban workers in East Asia and Europe, 1880-1938
1. Introduction How poor was Asia between the 1880s and the 1930s, at a time when Japan was the only industrialising country in the region? The common perception, often based on available per capita GDP estimates (Maddison 2001), is that Japanese living standards were below the West European average and much lower in other Asian countries. A common explanation for this impression, shaped by decades of debate on colonial exploitation, is that tax systems and other institutional arrangements introduced by colonial governments or forced onto governments of nominally independent countries depressed the living standards of the native and immigrant populations.1 World War II, most East and Southeast Asian countries After obtained independence and one after the other embarked on what Crafts (2003) interpreted as a Gerschenkronian escape from economic backwardness; a process of industrialisation orchestrated by ‘developmental states’, otherwise known as the ‘East Asian economic miracle’ (World Bank 1993). The only exception of this process is Japan which, according to its historical national accounts, experienced this miracle earlier in the 20th century.2 As the only truly independent Asian country, it embarked on a process of industrialisation at a much earlier stage than the rest of Asia.3 But were levels of welfare in the rest of Asia before this ‘East Asian economic miracle’ lower than in Japan, and much lower than in Europe? Several recent studies have sought to shed light on this matter. Van Zanden’s (2003) offered a correction for differences in purchasing power in the mid-19thJava and the Netherlands and suggested thatcentury for per capita GDP in Java was about one third of that of the Netherlands.4Allen (2001) offered a path-breaking international comparison within Europe since the 14thcentury by defining a measure of welfare as the ratio of daily wages to the price of a basket of commodities, in terms of quantities of calories, protein and alcohol content of beverages.5 Allen (2006)
1 Booth (2004) shows that per capita tax  However,revenues were low in most Southeast Asian countries, particularly in Siam and in French Indochina. 2 Japanese historical national accounts are currently the most reliable for Asian countries, and have been widely used to interpret Japan’s long-term development. However, recent research showed that agricultural output, and possibly output in cottage industries and traditional services, is underestimated for 1870-1900 (Bassino 2006). Hence, Japan’s early economic growth may have been lower and its development experience less miraculous than its national accounts suggest. 3least until the 1930s, mostly under British influence. The central government of China had toThailand was, at accept until 1945 that its sovereignty over a number of major cities or regions remained limited or shared with foreign powers. Arguably, the same applies to Iran and Afghanistan. 4in rural Java earned about the same as in rural partsHowever, available wage data suggest that skilled workers of The Netherlands. 5Allen (2001) calculated welfare ratios for European cities assuming, per worker, 250 days worked per year and 2 dependants (adult equivalent; implying that a household’s members could be a male and a female adult and 3
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