I’m not particularly invested in the issue but it seems like you’re underestimating the importance of the Eastern and Western Germany diversion. That is about as close as we’re ever going to get to having actually experimental conditions to test this hypothesis. We have one nation, divided it in half, structured their economies in accordance with the leading theories of the time, let them develop, and found a clear winner. Of course there are possible sources of error and maybe there are reasons to think the lessons learned in Germany don’t apply to the rest of the Soviet bloc, but this is about as compelling as evidence gets in economics.
It’s very compelling evidence that common knowledge is wrong, as GDP per capita ratios of West and East Germany were virtually identical in 1950 and 1990.
All the difference happened during the war (East Germany suffered from incomparably more fighting and destruction than West Germany) and earliest years of occupation (Soviets plundered everything they could and destroyed the rest; while Western Allies gave massive levels of economic aid in form of the Marshal Plan).
German experience is a great proof that the difference in economic performance between Communism and Capitalism is minor.
I was going to raise two of the same points (Marshal plan and Soviet looting), but I would consider only managing to not fall even further behind a relative failure. And that’s with both the FRG (e. g. giving the GDR access to the EC market) and the Soviets ( can’t find a source right now but IIRC they tried to prove that the socialist system could allow a high standard of living) trying to prop up their economy towards the end of that period.
I would consider only managing to not fall even further behind a relative failure.
The paper I’ve linked to so many times deals with this converge question. There seems to be no evidence for any kind of global economic convergence—or any worldwide correlation between economic levels and economic growth—you seem to only converge to levels of your geographically close trading partners. East Germany mostly traded with countries even poorer than itself. West Germany traded mostly with very rich countries.
Of course you could ask question like “so why didn’t the trade more with the Western Europe and USA etc.”, but you could be asking the same question about Mexico, Argentina, Indonesia, New Zealand, and countless other countries which did worse than Communist average.
Overall, evidence for Communism being an economic failure is shockingly underwhelming relative to how widely and strongly it is believed.
I think recovery after war and plundering is a bit different than normal convergence. Wrecked developed nations don’t behave like developing nations of the same GDP. Since a main difference was East Germany being even more wrecked more of their GDP growth should have been of the easier rebuilding/recovery sort.
I’m not particularly invested in the issue but it seems like you’re underestimating the importance of the Eastern and Western Germany diversion. That is about as close as we’re ever going to get to having actually experimental conditions to test this hypothesis. We have one nation, divided it in half, structured their economies in accordance with the leading theories of the time, let them develop, and found a clear winner. Of course there are possible sources of error and maybe there are reasons to think the lessons learned in Germany don’t apply to the rest of the Soviet bloc, but this is about as compelling as evidence gets in economics.
It’s very compelling evidence that common knowledge is wrong, as GDP per capita ratios of West and East Germany were virtually identical in 1950 and 1990.
All the difference happened during the war (East Germany suffered from incomparably more fighting and destruction than West Germany) and earliest years of occupation (Soviets plundered everything they could and destroyed the rest; while Western Allies gave massive levels of economic aid in form of the Marshal Plan).
German experience is a great proof that the difference in economic performance between Communism and Capitalism is minor.
I was going to raise two of the same points (Marshal plan and Soviet looting), but I would consider only managing to not fall even further behind a relative failure. And that’s with both the FRG (e. g. giving the GDR access to the EC market) and the Soviets ( can’t find a source right now but IIRC they tried to prove that the socialist system could allow a high standard of living) trying to prop up their economy towards the end of that period.
The paper I’ve linked to so many times deals with this converge question. There seems to be no evidence for any kind of global economic convergence—or any worldwide correlation between economic levels and economic growth—you seem to only converge to levels of your geographically close trading partners. East Germany mostly traded with countries even poorer than itself. West Germany traded mostly with very rich countries.
Of course you could ask question like “so why didn’t the trade more with the Western Europe and USA etc.”, but you could be asking the same question about Mexico, Argentina, Indonesia, New Zealand, and countless other countries which did worse than Communist average.
Overall, evidence for Communism being an economic failure is shockingly underwhelming relative to how widely and strongly it is believed.
I think recovery after war and plundering is a bit different than normal convergence. Wrecked developed nations don’t behave like developing nations of the same GDP. Since a main difference was East Germany being even more wrecked more of their GDP growth should have been of the easier rebuilding/recovery sort.