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Did Australian Living Standards Stagnate between 1890 and 1940?

Published online by Cambridge University Press:  03 March 2009

Ian W. McLean  and
Jonathan J. Pincus
Ian W. McLean
Affiliation:
Senior Lecturer in Economics, University of Adelaide, Adelaide, South Australia 5001
Jonathan J. Pincus
Affiliation:
Senior Lecturer in Economics, University of Adelaide, Adelaide, South Australia 5001
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Abstract

Among the developed countries, Australia in the period 1890–1940 experienced the fastest growth in population but the slowest in per capita income. When adjusted to incorporate the direct deflation of consumption expenditure, however, the growth of real GDP is raised by one-third, albeit to the still modest level of 0.8 percent annually. Inspection of a number of historical social indicators, not all caught in GDP, gives no support to the hypothesis of stagnant living standards. Finally, increases in life expectancy, a shorter working week, and earlier retirement also suggest substantial improvements in dimensions of standards of living not directly reflected in measured GDP. Conservatively, we estimate that living standards may have doubled over the half-century.

Type
Papers Presented at the Forty-Second Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 43 , Issue 1 , March 1983 , pp. 193 - 202
Copyright
Copyright © The Economic History Association 1983

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References

1 Butlin, N. G., Australian Domestic Product, Investment and Foreign Borrowing 1861–1938/39 (Cambridge, 1962);Google ScholarButlin, N. G., “Some Perspectives of Australian Economic Development, 1890–1965” in Forster, Colin, ed., Australian Economic Development in the Twentieth Century (Sydney, 1970);Google ScholarSinclair, W. A., The Process of Economic Development in Australia (Melbourne, 1976), pp. 202–05;Google ScholarBoehm, E. A., Twentieth Century Economic Development in Australia (Melbourne, 1979), pp. 32–33, 44, and 277;Google Scholar and Schedvin, C. B., “Midas and the Merino: A Perspective on Australian Economic Historiography,” Economic History Review, 32 (11 1979), 553–54.CrossRefGoogle Scholar

2 There is discussion relevant to the issue in Butlin, N. G., “Long-run Trends in Australian Per Capita Consumption” in Hancock, Keith, ed., The National Income and Social Welfare (Melbourne, 1965). No statistics, however, are presented and comparisons of the type we are interested in are not made.Google Scholar

3 Maddison, Angus, “Phases of Capitalist Development,” Banca Nazionale de Lavoro Quarterly Review, 30 (06 1977), 103–31.Google Scholar

4 Argentina, which was not included in the comparative studies cited in the text, may have experienced a long period of very low per capita growth in real GDP during the twentieth century.Google Scholar

5 The GDP and aggregate consumption estimates are drawn from Butlin, N. G., Australian Domestic Product,Google Scholar and from Butlin, Matthew W., A Preliminary Annual Database 1900/01 to 1973/74, Research Discussion Paper 7701, Reserve Bank of Australia, 1977.Google Scholar

6 Usher, Dan, in The Measurement of Economic Growth (Oxford, 1980), goes farther and argues that the consumption deflator should be applied to savings, and the result added to real consumption itself in order to arrive at the best non-augmented measure of economic welfare.Google Scholar

7 If the true services of the public capital stock exceed measured, and this understatement is growing over time, then the true growth rate of GDP is underestimated when private sector output is growing no faster than is measured output from the public capital stock (which was the case between 1891 and 1939).Google Scholar

8 Such inclusion violates the usual valuation procedures by which consumer surpluses are purged from GDP.Google Scholar

9 For a potted history of the main Australian public enterprises, see Butlin, N. G., Barnard, A., and Pincus, J. J., Government and Capitalism: Public and Private Choice in Twentieth Century Australia (Sydney, 1982), part 4.Google Scholar

10 Rubinstein, W. D., “The Distribution of Personal Wealth in Victoria 1860–1974,” Australian Economic History Review, 19 (03 1979), 38.Google ScholarA discussion of the available historical estimates of income distribution is contained in Jones, F. L., “The Changing Shape of the Australian Income Distribution, 1914–15 and 1968–69,” Australian Economic History Review, 15 (03 1975), 21–34.CrossRefGoogle Scholar