On estimating the warmaking potential of the world's regions

Discussions on the economic history of the nations taking part in WW2, from the recovery after the depression until the economy at war.
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Guaporense
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Re: On estimating the warmaking potential of the world's regions

Postby Guaporense » 21 Apr 2017 04:04

I have found a good estimate of German GDP evolution during the war (Ritschl and Spoerer (1997)), so that I can compare the evolution of GDPs during the war. Apparently, there was "economic growth" in WW2, even though some countries didn't grow (France, Italy, Belgium, more precisely). This growth was fundamentally the result of people working harder to reduce the fall of consumption in light of resource mobilization by governments plus distortionary effects of inflation (inflation tends to boost GDP growth in the short run). Kuznets GDP estimate for the US was made in light of these distortionary effects.

Here are my final results:

https://docs.google.com/spreadsheets/d/ ... sp=sharing

Note that for the USSR I used two GDP figures: Maddison's and using 1913 official exchange rates, they differ by 8%. And Germany's GDP in the beginning of the time series is 3% lower than in the table for 1937. The reason for this discrepancy is that I adjusted German GDP downwards using data from Ritschl and Spoerer (1997) time series from 1905 onwards, to make it consistent with the wartime GDP series (since the 1905 PPP and the new 1937 PPPs match with discrepancy of less than 1%, using this difference in their time series from 1913 onward to correct for a lower German GDP appears sensible).

Overall, the ratio between these territories didn't change from 1937 to 1943:

Germany + occupied Western Europe + Italy + Japan / US+UK+USSR
1937: 67%
1943: varies 77.6% or 68.8% depending on which US time series to use and which USSR's GDP estimate to use

Overall, the Allies enjoyed indeed a superiority in aggregate resources over the Axis (because the Axis only get to reach 89% of the Allies' GDP if I reduce the USSR's GDP by the measure of the occupied regions and put that figure into the Axis' GDP which is not a good because the Germans didn't manage to extract almost anything from the Eastern front's territories if compared to Western Europe). Overall though, it's not true the Allies enjoyed a massive superiority, it was a 30% to 50% superiority which is significant but highly asymmetric: while Japan was fighting against an enormously superior US's resources (6 to 8 fold difference depending on the measure used), the USSR was fighting against an enemy who controlled most of Europe, so it was a 390% to 360% difference in aggregate GDP size in 1941-1943 between Germany + Italy + occupied Western Europe against the USSR on average (if using Maddison's figures or 1913 market exchange rate for the USSR's GDP). Not quite as big as Japan versus the US (650% to 770%, depending on the estimate on US GDP growth during the war but almost as big).
"In tactics, as in strategy, superiority in numbers is the most common element of victory." - Carl von Clausewitz

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Re: On estimating the warmaking potential of the world's regions

Postby Guaporense » 21 Apr 2017 07:42

Note: German growth over 1937 to 1943 was tremendous, at 94%, it was much greater than growth in other countries, in Britain, US and Japan it was around 30% (or over 50% using Kendrick's more "inflationist" view of wartime GDP). Why was that? 3 reasons.

1st - The population of Germany expanded from 68 million in 1937 to 99 million in 1943, this includes the population of the annexed territories plus the massive population of foreign workers who "migrated" to work in Germany.

2nd - The German economy was badly hit by the great depression and in 1937 it was far below it's long run growth trend (growth in per capita income from 1905 to 1937 was about 45%, a healthy economy would expect growth of about 75%), so by the late 1930's, Germany's economy was operating far below it's inherent capacity: the growth in per capita income from 1937 to 1943 was still less than enough to bring German per capita income back to it's "normal" level which is given by a trend growth from 1905 to 1943 of about 1.7-1.8% a year.

3rd - Germany imported a lot of commodities from the occupied countries for super low prices because the currencies of occupied countries were kept far below their equilibrium values. This lowered prices inside Germany and so allowed the GDP deflator to not increase while nominal GDP increased, making the economy appear bigger than it really was thanks to it's artificially inflated currency.
"In tactics, as in strategy, superiority in numbers is the most common element of victory." - Carl von Clausewitz

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Re: On estimating the warmaking potential of the world's regions

Postby Guaporense » 22 Apr 2017 18:53

Using these time series data I also estimated the evolution of the aggregate GDP of the territories under German control after the Battle of France from 1937 to 1944:

https://docs.google.com/spreadsheets/d/ ... sp=sharing

By 1943 GDP was up 21% from 1937, less than the UK's 28% or Japan's 30% or the US's (either 32% or 56% depending on how "liberal" the time estimate series is). Germany's growth of 94% came at the expense of the economic decline of the rest of continental Europe and the annexation of territories with about 22 million people plus 8 million imported slaves.
"In tactics, as in strategy, superiority in numbers is the most common element of victory." - Carl von Clausewitz

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Re: On estimating the warmaking potential of the world's regions

Postby Guaporense » 24 Apr 2017 02:26

In this table I made using Gregory Clark's estimate of average British real earnings in 2010 pounds and the relative per capita incomes (which were very strongly correlated with earnings, in Germany in 1905, real per capita income was 79.5% of the UK's and reak earnings were 79.9% of the UK's, so I think that it's ok in using per-capita income as a proxy for real earnings and it gives an idea of living standards back them for several countries and the overall economic growth from 1905 to 1950.

Image

I also computed per capita incomes in wartime and populations (used Rischlt and Spoerer (1997) estimated German wartime population) while estimated Soviet wartime population using Harrison's estimate of the size of the labor force and the population figure for 1940:

Image

To check on the accuracy of these GDP figures I compared them with indexes of industrial commodities production (steel, coal and electricity) of 4 countries:

Image

Overall, it appears to be true, for instance, that Germany's economy was slightly larger in 1942-1943 than the UK and the Soviet Union combined.

Overall accurate. Although I lack complete data on the US I suspect US industrial commodity output on average to be relatively higher than estimated GDP (well, coal was about 5/3 of Germany's but steel and electricity were more than twice German levels).
"In tactics, as in strategy, superiority in numbers is the most common element of victory." - Carl von Clausewitz


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