World War II abruptly reversed this progress. Indeed, in terms of per capita GDP, the war sent the modern Japanese economy back to square one, erasing virtually all the gains it had made since the end of the nineteenth century.
Japan’s Postwar Miracle
The next chapter in the story is well known. The devastated Japanese economy rose quickly from the ashes of World War II. By 1956, real per capita GDP had overtaken the prewar 1940 level. During the recovery period (1945–56), per capita GDP rose at an average annual rate of 7.1%. Recovery was followed by the era of rapid growth era. As the graph reveals, Japan began closing in on the West once again, and at a speed far exceeding its prewar progress.
In 1973, Japan’s per capita GDP was 95% that of Britain and 69% that of the United States. That was the last year of the so-called rapid-growth era, but the Japanese economy continued to expand at a comparatively brisk rate for almost two more decades. By 1991—the last year of the “bubble economy”—Japan’s per capita GDP was 120% that of Britain and 85% that of the United States. Despite the setback of World War II, the process of catching up with the West, begun a little more than a century earlier, was basically complete.
By 1990 in Japan, the catch-up process was virtually complete and the portion of the labor force employed in the agriculture sector had dropped to 6.5% from the 1955 level of 36%.
Some make the case that China has reached the end of its catchup or that it will economically stall out because of a forecasted 6.5% GDP growth. Dropping from 10+% GDP growth is one thing. However, matching US and Japan at 1-3% GDP for the long term is another.
China still has over 25% labor in agriculture.
China per capita GDP on a PPP basis is still 3 times less than Japan and the UK. Japan basically caught up to the UK per capita GDP PPP and then matched UK per capita GDP growth.
The US ($1257 per cap) had achieved double Japan's per capita GDP ($660) in 1820.
The US had $6800 per cap in 1929 and Japan had ($1850) per cap in 1930.
China had $600 per cap GDP PPP from 1500. It went slightly backwards to $530 in 1830 and then dropped to $438 in 1950 and did not get past $600 per cap GDP PPP until 1963. It was $838 in 1975 and then took off. $1258 in 1983. $3013 in 1997. $6725 in 2008. About $13000 in GDP in 1990 PPP per cap today. China is about $15000 GDP PPP per cap in todays dollars.
Japan is at $36000 PPP GDP per cap today.
The USA is at $53000 GDP per cap today.