China, Poland, and Divergence

I created the Anti-Convergence Club so I could have concrete examples of how more economic liberty translates into higher living standards.

In effect, it’s the data-driven version of my Never-Answered Question.

Yesterday, I provided another example of anti-convergence by comparing Australia, Switzerland, and the United Kingdom.

Today, let’s look at Poland and China. This tweet from Professor Noah Smith shows that Poland was richer than China 30 years ago and – contrary to convergence theory – has become even richer over time.

I closely follow international economics, but I confess that this data came as a surprise.

It’s not that I have had an overly optimistic view of China (see here, here, here, and here).

But I obviously have overlooked Poland’s progress (even though I wrote about that nation’s relative success in both 2014 and 2017).

And why is Poland also enjoying relative success when compared with China? The answer, at least in part, is that Poland enjoys more economic freedom.

By the way, Poland is not a role model. Many of its neighbors (the Baltic nations, Germany, and the Czech Republic) have significantly higher levels of economic liberty.

That being said, the comparison between Poland and China shows that sometimes you win a race because you are fast and sometimes you win because the other contestant is slow.

P.S. To continue that metaphor, China may be even slower than what we see in the official data (though still not as slow as basket cases such as Argentina, Cuba, and Venezuela).