Economic RecordDenmark’s overall economic record is gloriously boring. From 1890 to 1916, per capita growth averaged about 1.9 percent per year, and if in 1916 you had forecast that this pace would continue for another 100 years, you would have been off by only about $200. Denmark had positive growth about 84 percent of the time and no deep recessions, according to a recent study by Lant Pritchett and Lawrence Summers. Or consider the U.S., where per capita income surpassed Latin America in the 19th century –thanks mainly to the latter’s stagnation. U.S. growth rates at the time were typically below 2 percent, and even lower up through 1860, hardly impressive by the standards of today’s China or India — or for that matter today’s U.S. The big advantage of the U.S. is that it avoided major catastrophe for long periods of time, apart from the Civil War, and pushed ahead with fairly steady progress.
The 19th-century Latin American stagnation, aside from wasting valuable time, left much of the region with weaker infrastructure, poor educational systems and a more dysfunctional politics.Slow growth doesn’t mean that the U.S. or Denmark were failures in the 19th century. It’s hard for economies at or near the technological frontier to rapidly improve living standards, because invention is usually slower than playing catch-up by borrowing technologies from wealthier nations. Such borrowing of know-how, along with exports and rapid investments in education and infrastructure, is what later allowed the Asian tigers of Japan, South Korea, Taiwan, Hong Kong, Singapore and China to achieve growth rates of 8 percent to 10 percent a year.