Controlled experiments are not feasible in economics. But we came close in the competition between East and West Germany after the second world war. Both countries started with the same culture, the same language, the same history and the same value systems. Then for 40 years they competed on opposite sides of a line. The only major difference was their political and economic systems: central planning vs market capitalism.
The experiment came to an abrupt close in 1989 with the fall of the Berlin Wall, exposing the economic ruin of decades of Soviet-bloc economics. Centrally planned East Germany had exhibited productivity levels little better than one-third those of market-oriented West Germany. Much of the then third world, absorbing the tutorial, converted quietly to market capitalism.
China, especially, replicated the successful export-orientated economic model of the so-called Asian tigers: fairly well-educated, low-cost workforces, joined with developed-world technology. Functioning in newly opened competitive markets, China and much of the developing world unleashed explosive economic growth. Between 2000 and 2007 the growth rate of real gross domestic product in the developing world was almost double that of the developed world. The International Monetary Fund estimated that in 2005 more than 800m members of the world’s labour force were engaged in export-orientated and therefore competitive markets, an increase of 500m since the fall of the Wall. Additional millions became subject to domestic competitive forces, especially in the former Soviet Union.