T H E SP R E A D O F MO D E R N I N D U S T R Y T O TH E PER IPH ER Y SI N C E 18 7 1 OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi The Spread of Modern Industry to the Periphery since 1871 Edited by K E V I N H J O R T S H Ø J O ’ R O U R K E and J E F F R E Y G A L E W I L L I A M S O N 1 OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi 3 OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University ’ s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Oxford University Press 2017 The moral rights of the authors have been asserted First Edition published in 2017 Impression: 1 S ome rights reserved. 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Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work. This book is dedicated to the future, our children. In O ’ Rourke ’ s case, Ciara, Joseph, Gabriel, and Sophie; and in Williamson ’ s case, Megan, Hilary, Kirk, and Amy. OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi Acknowledgements We are grateful to the European Research Council, the John Fell OUP Research Fund, All Souls College, and the Oxford History Faculty ’ s Global History Centre for their generous fi nancial and logistical support. We are particularly grateful to Simon Mee, Aileen Mooney, Claire Phillips, Jane Smith, Rosemary Strawson, Simon Unger, Alexis Wegerich, and the staff at All Souls College for all their help in organising the conference out of which this book arose. OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi Contents List of Figures xi List of Tables xiii List of Contributors xvii 1. Introduction 1 Kevin Hjortshøj O ’ Rourke and Jeffrey Gale Williamson 2. Measuring the Spread of Modern Manufacturing to the Poor Periphery 13 Agustín S. Bénétrix, Kevin Hjortshøj O ’ Rourke, and Jeffrey Gale Williamson PART I. EUROPE AND T HE MIDDLE EAST 3. State and Market in Russian Industrialization, 1870 – 2010 33 Andrei Markevich and Steven Nafziger 4. How Peripheral was the Periphery? Industrialization in East Central Europe since 1870 63 Alexander Klein, Max-Stephan Schulze, and Tamás Vonyó 5. Industrialization and De-industrialization in Southeast Europe, 1870 – 2010 91 Michael Kopsidis and Martin Ivanov 6. The Industrialization of Italy, 1861 – 1971 115 Matteo Gomellini and Gianni Toniolo 7. Industrialization in Egypt and Turkey, 1870 – 2010 142 Ula ş Karakoç, Ş evket Pamuk, and Laura Panza P A R T I I . A S I A 8. East Asian Industrial Pioneers: Japan, Korea, and Taiwan 169 Dwight H. Perkins and John P. Tang 9. Industrialization in China 197 Loren Brandt, Debin Ma, and Thomas G. Rawski 10. From Artisanal Production to Machine Tools: Industrialization in India over the Long Run 229 Bishnupriya Gupta and Tirthankar Roy 11. From Commodity Booms to Economic Miracles: Why Southeast Asian Industry Lagged Behind 256 Jean-Pascal Bassino and Jeffrey Gale Williamson OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi PART III. LATIN A MER I CA 12. Industrialization and Growth in Peru and Mexico, 1870 – 2010: A Long-Term Assessment 289 Aurora Gómez-Galvarriato and Graciela Márquez Colín 13. Industrial Growth in South America: Argentina, Brazil, Chile, and Colombia, 1890 – 2010 318 Xavier Duran, Aldo Musacchio, and Gerardo della Paolera PART IV. S UB-SAHARAN AF RICA 14. Patterns of Manufacturing Growth in Sub-Saharan Africa: From Colonization to the Present 345 Gareth Austin, Ewout Frankema, and Morten Jerven General Index 375 Contents x OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi List of Figures 2.1. Regional diffusion curves: reaching the 5 per cent threshold 20 2.2. Regional population-weighted diffusion curves: reaching the 5 per cent threshold 21 2.3. Cross-country correlations: growth in subsequent periods 25 3.1. Russian GDP and industrial output per capita 36 3.2. Russian day wages and yearly salaries, 1853 – 1913 40 3.3. Sectoral value-added shares and resource rents, 1990 – 2010 53 4.1. Installed capacity in electrical power generation per head of the population 77 4.2. Number of residents in the country per registered automobile in 1935 77 5.1. Sectoral composition of Greek GDP, 1951 – 94 (per cent) 107 6.1. Unconditional convergence of industrial value added (all available countries) 117 6.2. Convergence in industry, divergence in GDP, 1871 – 1961 133 6.3. Divergence in per capita manufacturing, 1871 – 1961 135 7.1. Value added in manufacturing in Egypt and Turkey, 1870 – 2010 144 7.2. Share of manufacturing in GDP in Egypt and Turkey in current prices, 1870 – 2010 (per cent) 151 7.3. Share of manufactures in total exports, 1870 – 2010 (per cent) 154 7.4. Real wages in manufacturing in Egypt and Turkey, 1870 – 2007 156 8.1. United States and Japanese industry shares, 1885 – 1914 174 8.2. Sector PPP per dollar for Korean tradable sectors, 1970 184 8.3. Korea: the share of producer and consumer goods industries (per cent) 186 8.4. Taiwanese manufacturing real wages, unit labour costs, and labour productivity 190 8.5. Indices of Korean manufacturing real wages, own wages, and labour productivity 191 10.1. Changes in GDP and its components in 1948 – 9 prices 233 10.2. GDP (1948 – 9 prices) by sector, 1901 – 2000 (per cent of total) 234 10.3. Shares of industrial output (per cent) 235 10.4. Industrial output in 1948 – 9 prices 249 11.1. Share of Southeast Asian manufacturing in GDP, 1960 – 2013 (per cent) 257 11.2. Net terms of trade, 1782 – 1913 262 11.3. Exports of main agricultural products (kg per capita) between 1930 and 1970 275 11.4. Manufactured goods as percentage of merchandise exports 277 11.5. Inward foreign investment stock as percentage of GDP 278 11.6. Number of Japanese manufacturing subsidiaries established by decade 280 OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi 12.1. Manufacturing GDP per capita 290 12.2. Manufacturing exports as percentage of total exports 290 12.3. Terms of trade 295 12.4. Mexico: level of openess and nominal tariff rates 295 12.5. Peru: level of openess and implicit tariff rates 300 13.1. Real distorted import price indices for Argentina, Brazil, Chile, and Colombia, 1900 – 2012 (1939 = 100) 333 14.1. Unskilled urban labourers ’ wages in pence per day, 1880 – 1960 351 14.2. Composition of imports in Senegal, 1961 – 2012 362 14.3. Minimum wages in a selection of African and Asian countries, 2010 – 11 (US dollars per month) 366 List of Figures xii OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi List of Tables 2.1. Average industrial growth rates (per cent, per annum) 16 2.2. Industrial growth in early members of the ‘ modern growth club ’ 18 2.3. The top ten performers by region and period 22 2.4. Catching-up: industrial growth rate relative to leaders 26 2.5. Unconditional industrial catching-up 27 3.1. Russian industrial and GDP growth rates by period, 1860 – 2010 37 3.2. Value added by sector in the Imperial Russian economy, 1885 and 1913 38 3.3. Russian/Soviet national income by fi nal use and sector, 1913 – 40 44 3.4. The growth of Soviet GDP, total factor productivity, and factor inputs, 1928 – 85 48 3.5. Russian macroeconomic indicators, select years 52 4.1. GDP per capita in Central Europe (Germany = 100) 65 4.2. Share of manufacturing in industrial, sectoral, and aggregate gross value added (per cent) 68 4.3. Annual growth, gross valued added (per cent) 68 4.4. Modern manufacturing: relative contributions to manufacturing growth (per cent, per annum) 71 4.5. Sectoral composition of labour force (per cent) 71 4.6. Manufacturing gross value added by region (1990 Geary – Khamis dollars) 73 4.7. Economically active population by sector (per cent) 76 4.8. Share of industry in gross value added in 1975 prices (per cent) 81 4.9. The composition of gross industrial value added in current prices (per cent) 81 A.4.1. Indices of gross value added (constant 1913 prices, 1913 = 100) 85 A.4.2. Indices of gross value added (constant prices, 1950 = 100) 86 A.4.3. Branch shares in total manufacturing gross value added (per cent) 88 5.1. Real growth rates of Southeast European industry, 1870 – 1938 93 5.2. Sectoral shares in manufacturing output, 1912 – 38 94 5.3. Manufacturing growth in Southeast Europe, 1950 – 2007 (annual rates) 97 5.4. Share of industry in GDP, 1950 – 2010 97 5.5. Employment share of industry in former European COMECON states 103 5.6. Industrial and manufacturing growth in Yugoslavia according to different sources using of fi cial and revised data, 1950 – 88 104 6.1. Average annual growth rates of GDP and manufacturing 118 6.2. Industrial employment as a percentage of total employment 120 6.3. Shares and annual average growth rates of the ‘ modern ’ sector, 1870 – 1973 122 OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi 6.4. Industrial value added per inhabitant: Italy, four Italian macro areas, and selected countries, 1891 – 1971 (Geary – Khamis 1990 dollars) 131 6.5. Distribution of value added by modern sectors across macro areas 132 7.1. Long-term trends in Egypt and Turkey, 1870 – 2010 143 8.1. Disaggregated trade shares by manufacturing sector, 1880 – 1930 175 8.2. Disaggregated trade shares in textiles and metal goods, 1880 – 1930 176 8.3. Export and import shares by region, 1880 – 1940 178 8.4. Korean exports by sector 185 8.5. Taiwanese shares of industrial sectors in industry and mining (per cent) 188 8.6. Taiwanese sectoral export shares (per cent) 188 9.1. Comparative growth of industrial output, 1912 – 2008 198 9.2. Comparative industrialization: China, India, Japan, and Russia/USSR, 1912 – 2008 199 9.3. Chinese exports of manufactures: scale and share of production and overall exports, 1933 – 2008 200 9.4. Share of industrial output by region, 1933 – 2008 200 9.5. Breakdown of industrial output by ownership, 1933 – 2008 (per cent) 202 9.6. Number of domestic, privately owned modern factories established, by region and decade, 1841 – 1915 206 9.7. Breakdown of industrial output by sector 206 9.8. Gross output value and employment in manufacturing by type of fi rm, China proper, 1933 208 9.9. Inward and outward FDI (US$ billion) 217 9.10. Real annual growth rates for gross output value, 1952 – 2008 (per cent) 218 9.11. Sectoral SOE shares and TFP growth, 1998 – 2007 221 10.1. Employment in factories (thousands) 232 10.2. Capital formation and the public sector 244 10.3. Industrial growth, 1951 – 98 (per cent, per annum) 246 10.4. Trade regulation by type of industry (per cent) 247 10.5. Sectoral growth over the twentieth century (per cent, per annum) 248 10.6. Sources of growth (per cent, per annum) 250 10.7. Manufacturing value added per capita in US dollars, 1998 251 10.8. Gross fi xed capital formation in manufacturing and the share of machinery in industrial output 251 11.1. Industrial output growth, 1870 – 2007: Southeast Asia and the rest (per cent, per annum) 259 11.2. Terms of trade volatility in Southeast Asia, 1865 – 1939 263 11.3. Population density in Southeast Asia, Japan, and Korea (inhabitants per square kilometre) 264 11.4. Terms of trade bust, 1913 – 49 (1990 = 100) 265 OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi List of Tables xiv 11.5. Export concentration in Asia around 1900 266 11.6. Share of exports in GDP, 1901 – 38 (per cent) 266 11.7. Mean primary schooling enrolment rates in Southeast Asia, 1880 – 1960 (per cent) 272 11.8. Average years of schooling aged 25 – 64, 1960 – 2010 274 12.1. Mexico: manufacturing indicators 292 12.2. Peru: manufacturing indicators 293 12.3. Mexico and Peru: manufacturing structure, 1929 – 2010 298 12.4. Mexico: macroeconomic variables 304 12.5. Peru: macroeconomic variables 305 13.1. Industrial GDP growth rates, South America vs global leaders (per cent, per annum, annual averages) 320 13.2. Convergence/divergence among South American nations and the developed country leaders 321 13.3. Average labour productivity growth rate: Argentina, Brazil, Chile, Colombia, and the United States 323 13.4. Population, urbanization and illiteracy rates (per cent), and transportation infrastructure: Argentina, Brazil, Chile, and Colombia, 1900 – 2000 324 13.5. Industrial value added by type of industry, Brazil and Colombia, 1940 – 95 (per cent) 331 14.1. Manufacturing output in context for selected African countries, 1960 (US 1964 dollars) 353 14.2. Volume index of manufacturing production in the Belgian Congo, 1939 – 57 (1947 – 9 = 100) 358 14.3. Industrial production in Belgium and the Belgian Congo, 1957 359 14.4. Aggregate annual average growth rates of industry and manufacturing in Sub-Saharan Africa, 1961 – 2000 363 14.5. Average annual growth rate of manufacturing output (per cent) 364 OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi xv List of Tables OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi List of Contributors Gareth Austin , University of Cambridge Jean-Pascal Bassino , Ecole Normale Supérieure de Lyon Agustín S. Bénétrix , Trinity College Dublin Loren Brandt , University of Toronto Gerardo della Paolera , Universidad de San Andrés and CEU Xavier Duran , Universidad de los Andes Ewout Frankema , Wageningen University Matteo Gomellini , Banca d ’ Italia Aurora Gómez-Galvarriato , El Colegio de México Bishnupriya Gupta , University of Warwick Martin Ivanov , So fi a University Morten Jerven , Norwegian University of Life Sciences Ula ş Karakoç , Humboldt-Universität zu Berlin Alexander Klein , University of Kent Michael Kopsidis , Leibniz Institute of Agricultural Development in Transition Economies Debin Ma , London School of Economics Andrei Markevich , New Economic School (Moscow, Russia) Graciela Márquez Colín , El Colegio de México Aldo Musacchio , Brandeis University Steven Nafziger , Williams College Kevin Hjortshøj O ’ Rourke , All Souls College, Oxford Ş evket Pamuk , Bo ğ aziçi University, Istanbul Laura Panza , University of Melbourne Dwight H. Perkins , Harvard University Thomas G. Rawski , University of Pittsburgh Tirthankar Roy , London School of Economics Max-Stephan Schulze , London School of Economics John P. Tang , Australian National University Gianni Toniolo , Libera Università delle Scienze Sociali, Roma Tamás Vonyó , Bocconi University Jeffrey Gale Williamson , emeritus, Harvard University OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi 1 Introduction Kevin Hjortshøj O ’ Rourke and Jeffrey Gale Williamson 1.1 INTRODUCTION Ever since the British Industrial Revolution, the transition to modern economic growth has been associated with industrialization. New labour-saving and energy- using technologies fi rst originated in Britain, and then spread with a lag to countries such as Belgium and France in continental Europe and North America (Allen, 2009). The initial impact was a ‘ Great Divergence ’ in living standards between Northwestern Europe and its New World offshoots, on the one hand, and the rest of the world on the other. This divergence is now being eroded as developing economies rapidly industrialize. But when did modern manufacturing fi rst begin to spread to the developing world? Was it only during the ‘ second globalization ’ which began in earnest in the 1980s? Or are the roots of industrial catch-up to be found in the long period of world deglobalization which began in 1914, and saw two world wars, the Great Depression, the breakdown of formal and informal empires, and import- substituting industrialization (ISI)? Or might the spread of modern manufacturing have started even earlier, during the ‘ fi rst globalization ’ of the late nineteenth century (O ’ Rourke and Williamson, 1999)? In both globalization periods, international economic integration may have helped developing countries import new technologies, exploit their lower labour costs, and import those raw materials with which they were poorly endowed (Wright, 1990). Alternatively, trade may have made it dif fi cult for developing countries to compete with established industries in richer countries (Williamson, 2011). In that case, the breakdown of the nineteenth-century international division of labour — which saw the industrial core economies export manufactures and import food and raw materials (Robertson, 1938; Lewis, 1978) — may have favoured industrial growth in the developing world. So what were the impacts of globalization and deglobalization on the spread of modern industry to the devel- oping world? Were the impacts uniform, or did they depend on the characteristics of the individual countries concerned? This volume has three goals. The fi rst is to document the origins of modern industrial growth around the global periphery: those regions in Southern and Eastern Europe, the Middle East, Asia, Latin America, and Sub-Saharan Africa OUP CORRECTED PROOF – FINAL, 16/1/2017, SPi