A tale of four economies

In 1945, Japan was a nation in ruins. Its cities were ash and rubble. Over 9 million people were homeless. Industrial output had fallen by more than 90% from its wartime peak. Tokyo’s manufacturing output was down to 14% of 1937 levels. Food production collapsed so severely that rice rations fell to just 1,500 calories per day per person. Hyperinflation spiralled to over 700% by 1946. The country’s GDP per capita dropped to less than $200 (in 1990 international dollars), placing it closer to sub-Saharan Africa than to Western Europe. For a country that had once beaten Russia in war and built Asia’s first industrial empire, it looked like the end.

Japan wasn’t alone. In the north, Finland had narrowly escaped Soviet absorption, but not without cost: in the 1944 peace treaty, it was forced to pay reparations worth 300% of its annual export income and lost 10% of its territory. Its economy was overwhelmingly agrarian, with 56% of the workforce still in farming by the end of the 1940s. GDP per capita hovered around $1,400 (1990 int’l $), far behind the UK ($6,900), Sweden ($9,500), or even Italy ($2,700). Like Japan, Finland’s urban centres were underdeveloped, industrial capital was scarce, and its exports were heavily dependent on raw timber.

Further east, Korea was in arguably worse shape than either. After 35 years of harsh Japanese occupation, the peninsula had almost no industrial base of its own. By 1945, literacy in the south was under 25%, GDP per capita was under $900 (1990 int’l $), and over 70% of the population worked in subsistence agriculture. Korea had no national banks, no large domestic firms, and no experience of self-rule. Worse still, the country was now split in half by Cold War politics and heading for a catastrophic civil war that would kill 3 million people and flatten what little infrastructure remained.

But there’s a crucial distinction here. Japan’s ruin was recent. Before the war, it had been a rising industrial power, albeit a militarised one. It was the first Asian nation to industrialise, and by 1925 its GDP per capita was already over $2,000 (1990 int’l $) - higher than Spain and nearly half of Britain’s. It had major industrial conglomerates (zaibatsu), modern rail, electric lighting, steelworks, and a banking system decades ahead of most of Asia.

Finland and Korea, by contrast, had never truly industrialised before 1945. Finland in the 1920s was essentially a forest economy with weak state institutions and virtually no export diversification. In 1929, its GDP per capita was only $1,450 - lower than Greece, Ireland, or Mexico at the time. Korea was poorer still. Under Japanese rule, nearly all industry and wealth was concentrated in the northern half (around Pyongyang), and the south remained a rural backwater.

Yet all three are rich countries today:

Finland’s GDP per capita in 2024 is $56,000, higher than the UK’s $48,900. South Korea has reached $49,000, up from just $2,300 in 1960 - a twentyfold increase in two generations. Japan, despite three “lost decades” of stagnation, still sits at $46,000, with one of the world’s highest life expectancies, best public safety records, and most advanced export economies.

And their successes aren’t limited purely to economic output either.

Finland consistently ranks among the top countries for education, topping the OECD’s PISA tests throughout the 2000s and maintaining high literacy, maths, and science scores despite spending less per pupil than the UK or US. It was recently ranked #1 happiest country in the world for the seventh year in a row (UN World Happiness Report, 2024), and enjoys low inequality, clean government, and strong civic trust.

South Korea leads the world in broadband penetration, has the fastest average internet speeds globally, and is home to Samsung, Hyundai, and the some of the world’s most advanced semiconductor supply chains. It now exports nuclear reactors, dominates global pop culture, and files more patents per capita than any other country. Seoul is a global megacity: vibrant, high-tech, and clean.

Japan, for its part, remains a powerhouse of precision manufacturing, robotics, and infrastructure. Despite an ageing population, it has the lowest homicide rate in the developed world (0.2 per 100,000), some of the most punctual trains on Earth (average delay: under one minute), and boasts a life expectancy of 84.5 years. Its national debt may be eye-watering on paper, but its borrowing costs remain low and domestic, and its industrial base is still the third-largest by value globally.

The UK, by contrast, sits uneasily beside them. It has higher GDP than Japan in nominal terms but lags behind all three in PPP-adjusted income. Its productivity has stagnated for 15 years. Its education system ranks in the OECD mid-table. It hasn’t hosted a major industrial champion since ARM, and it has never produced a Samsung, Nokia, or Toyota.

So how did three nations once seen as peripheral backwaters - or, in Japan’s case, flattened ruin - climb so far, so fast, and so enduringly?

An Outsider’s View

Economist Ha-Joon Chang offers a striking theory to explain how countries like Japan, South Korea, and Finland pulled off such rapid development.

In his book Kicking Away the Ladder (2002), Chang argues that the standard economic advice rich countries now give (free trade, minimal government, deregulation) is not the method they used to get rich themselves. Quite the opposite. Most of today’s developed nations industrialised by doing things they now tell poorer countries not to do.

The key concept is infant industry protection: governments deliberately shelter new, fragile domestic industries from foreign competition. That means high tariffs, import restrictions, and state subsidies. A local steelworks or electronics company that can’t yet match German or American prices is shielded while it grows. Once the industry becomes competitive on the world stage, once it has matured, then, and only then, is it exposed to global markets through free trade.

Chang argues that this is exactly what the UK did in the 1700s and 1800s, what the US did in the 1800s and early 1900s, what Germany and France did before WWI, and what Japan and South Korea did after WWII. It’s not that the state is always smarter than the market, but that strategic intervention, when timed correctly, allows countries to climb the technological and industrial ladder.

He gives particular attention to South Korea in the 1960s–80s, where the government didn’t merely regulate firms - it selected them. Ministries picked which companies would make cars, which would build ships, which would enter electronics. The firms were expected to export, hit performance targets, and scale fast. Those that succeeded were supported further. Those that failed were cut off.

But it didn’t always work. As Chang notes, governments sometimes picked the wrong winners. Korean firms went bankrupt. Japanese state enterprises flopped. Finland’s early attempts at state-led industrialisation often ran aground. Yet the overall effect, Chang argues, was positive: by creating the space for domestic firms to survive long enough to improve, protectionism allowed these countries to build global champions.

Once their industries were globally competitive, they liberalised. Japan’s export firms faced open competition. Korea joined the WTO and slashed tariffs. Finland, now inside the EU, plays by the same rules as Germany and France.

Chang’s view is deliberately provocative, and not universally accepted. Critics argue he underplays the role of education, institutional reform, foreign aid, or geopolitical luck. But he provides a powerful lens for interpreting how these “miracle” economies rose: not by trusting the market, but by actively shaping it, then stepping back once the groundwork was laid.

The Orthodox Response

To many mainstream economists, Ha-Joon Chang gets the story backwards. Yes, South Korea protected its firms. Yes, Japan had state-led development. But correlation isn’t causation, and protection isn’t the reason they succeeded.

The orthodox view says that markets allocate resources better than states. Bureaucrats can’t pick winners: if they could, every country would be rich. What really made Japan, Korea, and Finland grow wasn’t protectionism. It was education, macroeconomic stability, rule of law, and openness to ideas and innovation.

Take Korea. While the state directed credit and protected industries, it also invested massively in education. Literacy rose from under 25% in 1945 to near-universal by 1970. Primary and secondary schooling was nearly free, and by the 1990s, Korea had one of the world’s highest rates of tertiary education. A smart, disciplined workforce is a better bet than any tariff.

Japan’s postwar boom didn’t start with government direction: it started with US reconstruction aid, land reform, and a total rewrite of corporate law. The US poured over $2 billion into the country through the Dodge Plan and other instruments (equivalent to about $20 billion today). Meanwhile, Japan embraced global technology, ran low inflation, and avoided populist fiscal chaos. The Ministry of International Trade and Industry may have guided some industries, but it wasn’t calling all the shots.

And Finland? The country industrialised fastest after it liberalised in the 1980s, privatised state assets, and integrated with European markets. Nokia’s rise didn’t come from state subsidy, but from exposure to global demand, market discipline, and smart private leadership. Before that, the Finnish state may have tried to direct the economy, but mostly it failed. Exports stagnated, and firms remained tied to raw materials.

From this perspective, what really drove success in all three cases was not the infant industry protectionism Ha-Joon Chang warns about, but a stable climb built on human capital, legal predictability, and exposure to global best practice. State intervention may have coincided with growth, but so did a hundred other things.

More importantly, the counterpoint argues, for every Japan or Korea, there’s a dozen failed attempts at industrial policy: Ghana in the 1960s, India’s Licence Raj, Brazil’s over-leveraged state champions. The state has limited bandwidth. When it bets wrong, the whole country pays.

The Fourth Economy

The meteoric rise of Japan, South Korea, and Finland is not the only striking movement in the global economic rankings over the last century. There’s another country that once ranked alongside the richest in the world, but that took the opposite path.

To understand just how far it has fallen, we need to go back. In the 1910s, Britain sat atop a globe-spanning empire, covering 23% of the world’s land area and ruling over 400 million people. Its GDP per capita stood around $6,000 (1990 international dollars).

But Argentina wasn’t far behind.

In 1913, Argentina’s GDP per capita was $3,797 - higher than Germany, Italy, Spain, Japan, or Finland. It was ranked 10th in the world by income, ahead of Austria-Hungary and nearly level with France. Buenos Aires was called “the Paris of the South.” Its opera house, the Teatro Colón, rivalled Europe’s best. Waves of European immigrants arrived each year, mostly Spanish and Italian, drawn by high wages, cheap land, and a booming export economy. Meat, grain, wool: Argentina was the supermarket of the world.

It had one of the largest railway networks on the planet. Its literacy rates were higher than Spain’s. Its institutions were modelled on the US, its cities electrified, and its elites cultured and well-travelled. In 1914, the Argentine peso was effectively backed by gold. To many observers, Argentina looked like the next great power, but Instead, it flatlined.

By 2024, Argentina’s GDP per capita stands at $13,000, barely a quarter of Finland’s, a third of South Korea’s, and less than a third of the UK’s. It now ranks around 65th globally, behind countries like Romania, Malaysia, and Chile. It has defaulted on its sovereign debt nine times in the last century, suffered repeated currency crises, and experienced inflation rates that reached 3,000% in the 1980s and 200% in 2023. Nearly 40% of Argentines now live in poverty.

So what happened? Here was a country that had the land, the institutions, the immigration, the human capital, and the wealth. It was richer than Japan, more stable than Korea, more urban than Finland. But it fell, and never got back up.

How It Fell Apart

Argentina’s decline wasn’t sudden. It was the slow erosion of potential through a century of poor choices, mismanagement, and policy whiplash.

In the early 20th century, Argentina had all the ingredients for success: natural resources, a young population, rising literacy, and strong trade ties to Europe. But it made three key strategic errors.

First, it over-relied on commodity exports - meat, wheat, and wool - without developing a diversified industrial base. When global demand slumped in the 1930s, Argentina had no fallback. It didn’t invest seriously in manufacturing, unlike Japan or Korea.

Second, it turned inward. From the 1940s onward, Argentina embraced import substitution industrialisation. Under Juan Perón and successors, the government raised tariffs, subsidised domestic firms, and sought to reduce dependence on imports. But without clear performance metrics or global competition, many of these industries became bloated, inefficient, and politically protected. To take one example, its automotive sector, protected by high tariffs, produced overpriced cars that couldn’t compete globally, stifling innovation.

Third, it developed a toxic mix of fiscal populism and institutional instability. Governments ran chronic deficits, printing money to fund social programmes and subsidies. Central banks were not independent. Property rights were weak. Corruption became endemic. By the 1980s, trust in institutions had collapsed.

If Argentina had avoided these traps, if it had built export-facing industries, maintained macroeconomic stability, and invested in long-term institutions, it could plausibly have joined the high-income world. It had a stronger starting position than South Korea or Finland. But instead…

By 1989, inflation hit 5,000%. The 2001 debt default erased savings and plunged the country into chaos. In 2018, Argentina took a $57 billion IMF bailout - the largest in history at the time. It defaulted again in 2020.

In 2022, inflation reached 95%. In 2023, it surpassed 200%. The peso became almost unspendable. Shops posted prices in dollars. The middle class hollowed out. Poverty rose to 40%, and child poverty passed 60% in some regions.

Into this crisis stepped Javier Milei, a chainsaw-wielding libertarian economist who campaigned on abolishing the central bank, slashing government spending, and dollarising the economy. In December 2023, he won the presidency with a promise of “shock therapy.”

Since taking office, Milei has:

• Cut government spending by 30% in real terms

• Removed energy and transport subsidies

• Laid off thousands of public workers

• Floated the peso, leading to a sharp initial devaluation

Since then, the effects have been stark and measurable.

• Annual inflation dropped to 43.5% in May 2025, down from 300% in May 2024 .

• Monthly inflation hit a 1.5% low in May 2025—the lowest since mid‑2020  .

• Unemployment rose to 7.9% in the first quarter of 2025—the highest level in nearly four years .

• The economy returned to growth in Q1 2025, expanding by 0.8% quarter‑on‑quarter, with BBVA forecasting +5.5% for the year.

It was a far fall from the place Argentina held in the minds of people in 1910.

Looking Through the Long-Lens: 2000–2050

The transformations in Japan, Korea, and Finland were immense, but they were also gradual, often advancing under the radar year by year. So as we watch the world from 2000 to 2050, what comparable long‑burn success stories are already in motion?

Bangladesh has made one of the most underappreciated leaps in global development. In 2000, its GDP per capita (PPP) was around $1,500. By 2025, it’s over $10,300: a sevenfold increase. This growth has been driven by low-cost textile exports, rapid female labour force participation, remittances, and a steady expansion of infrastructure. Its flagship megaprojects, like the Padma Bridge, are physically stitching the country together. With continued political stability and investment in human capital, Bangladesh is targeting upper-middle-income status by 2031, and high-income by 2041.

Vietnam had a GDP per capita of just $2,100 (PPP) in 2000. Today, it’s over $13,800, and expected to reach $27–32,000 by 2050. Its success rests on a remarkably effective pivot: from a closed, centrally planned economy to one deeply embedded in global supply chains. Vietnam now serves as a key manufacturing hub for firms diversifying out of China, especially in electronics and garments. It has signed free trade agreements across Asia, the EU, and North America, and maintains one of the most investor-friendly regimes in the region.

Rwanda began the century still reeling from the 1994 genocide. In 2000, its GDP per capita (PPP) was just $1,000. In 2025, it’s above $2,800 - a more modest number than the previous two, but it reflects a tripling of income in a country that lost over 10% of its population to violence within living memory. Rwanda’s government has prioritised clean governance, digital infrastructure, and foreign investment, positioning Kigali as a pan-African services and conference hub. Vision 2050 sets an ambitious goal: high-income status within 25 years. And while sceptics raise questions about political freedoms, the economic transformation is real.

Others may also take off later in this window. Some, like Russia, have structural weaknesses, and the disastrous decision over Ukraine may see their downfall like Argentina. And others that are rising now, like China, may peak early and start to fade, as demographics begin to hurt.

Conclusion

We often assume the global economic rankings are fixed, that countries like the UK, Germany, and Japan sit permanently near the top, while others float below. But the order does shift. Britain has already slipped. Between 2007 and 2024, UK real GDP per capita grew by just 0.3% a year - a near-flatline across 17 years. Living standards barely moved. The rest of the world didn’t wait.

Germany, once a model of fiscal discipline and industrial strength, has made a series of catastrophic decisions, from cutting nuclear power during an energy crisis to underinvesting in infrastructure and defence. Its economy has stalled. By 2024, it was the worst-performing major economy in the G7, with forecasts barely clearing 0.2% growth for the year.

Britain could easily follow the same path. But we could also set a different aim: to overtake Germany in GDP per capita by 2050. If other countries can do it, so can we.