28 Comments
Mar 15, 2021Liked by Noah Smith

Are GDP statistics solid ground on which to build such assurances regarding the welfare of billions of people? Are these derived from each county's own government to measure their economy? How confident can we really be about the quality of these estimates, especially going back over decades? What flaws does the GDP method have—such as in African countries which seemed to boom at 7-12%+ annual during the commodity supercycle of the early 2000s, even though the majority of that value was immediately shifted to the Global North, retained by multinational firms? How appropriate is it to keep that value in the numerator, dividing by the country's entire population in the denominator when the vast majority of those people do not receive any benefit from those mines, offshore oil fields, or agricultural plantations? Doesn't it at least warrant caution when using this single, rough approximation as the definitive contest to judge the material progress of billions of lives?

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That's a good and important question, and I plan to write about it soon.

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I really think that GDP per capita PPP is a very important, specially when some economies are orders of magnitude bigger than others.

I think that we should think of GDP per capita not as a linear ranking but as "clusters" of nations with similar income.

Costa Rica and Mexico have roughly DOUBLE the GDP per capita of my country, El Salvador. That's a difference that I subjectively notice on the infrastructure and even the institutions of these nations, and I'd love that my country had that level of income.

If now we compare El Salvador and Guatemala, according to the IMF El Salvador is slightly poorer, but according to the World Bank is actually Guatemala the one that's slightly poorer. Is there a difference? To me there isn't: Both nations are equal in development to my eyes.

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Mar 15, 2021Liked by Noah Smith

I’m less sanguine about Africa’s prospects. Growth in all the success stories you produce depended upon exports, but it’s quite costly to export goods if you’re landlocked and your nearest neighbors with ports can’t be bothered to build roads from your cities to their ports

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It's certainly an issue.

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I think that's somewhat overstating the case. The communist countries of Eastern Europe are an unusual case but I wouldn't characterise them as having export led growth in the way that East or South Asia have had. Going back even further, I don't think that growth in continental Europe was export driven. For instance, the industrialisation of the Rhine-Rhur region going from Belgium to Northern Italy didn't industrialize by exporting to the already 'rich' country of Britain.

I basically agree with you exports appear central to the growth of late 20th and early 21st century success stories. Potentially this suggests that exportable services should play a greater part.

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"Growth in all the success stories you produce depended upon exports"

Exports aren't that important. Note that there is something of a J-curve relationship between a country's dollar price level and its GDP per capita. The very poorest countries have higher prices for domestically consumed goods and services than those with a GDP per capita ~20% of the U.S. by PPP (which have by far the lowest). This means that the key step to getting from lower income to the boundary between lower and upper middle income is improving the productivity of domestically consumed goods and services, not exports.

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"Why focus on Southeast Asia? Because the region was completely colonized by European powers (and briefly by Japan)." Actually Thailand was never colonized by a European power, but the fact that it's growing in tandem with its neighbors seems to underscore your larger point that having been colonized in the past doesn't make a whole lot of difference.

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I might also add that it probably contributes quite a bit to why Thailand is much better off than Cambodia, despite sharing a nearly identical culture and form of government. Cambodia went through a communist period which included the Khymer Rouge which probably challenged Leopold's Congo for worst government of the 20th century.

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I'm curious about South Asia and what's going on over there. Do you have any resources you recommend that are good introductions to why South Asia hasn't seen Southeast Asia's growth?

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I have heard a theory that Africa suffers from not having a Hong Kong equivalent to export norms of business etc to surrounding countries in the region. Is that something you think has any validity?

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S. Asia's colonisation is different to Africa's in that S.Asiain countries were colonised whole, or a kingdom subjugated then bits added to it to make them what they are today. Sub- Saharan Africa had a completely different trajectory; Borderlines were drawn haphazardly, without logic to facts on the ground (outside of the coloniser's perhaps) in a way that precludes the countries ever attaining a cohesive whole, which time is proving right.

Kingdoms divided in Solomonic ways (check out kanem-Borno), whilst bitter enemies forced to share the same country space, the way Churchill attempted in the Balkans.

Worse is fact that people with incompatible philosophies were forced to share these same country space and as development is philosophical, the ideological consensus needed to lunch economic progress can't be reached and history bears all these out.

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I’d want to follow closely the trajectory of Bangladesh and India because virtually all of the SE Asian economies are Confucian or have economies where Confucianists (Chinese immigrants) play a heavy role (or both). If it turns out that only or mostly only the Confucian-influenced countries can catch up with the Global North, that doesn’t bode nearly so well for the rest of the Global South (though, granted, Africa has seen a large influx of Chinese immigrants so maybe it does after all)?

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Would Japan or Korea be defined as Confucianist nations?

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“Tiny” Singapore has the same GDP than Malaysia, so yes, it makes two...

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My concern here, is that that the reversal from divergence to convergence reflects failures in Europe, not exactly successes in the global south. On GDP, SE Asia has done well, Brazil did well under Lula (and better on poverty reduction thanks to his egalitarianism), and some African countries have done really well (and some okay, and some just standard bad African performance), but they were competing against Europe and Europe has gone through a few rounds of opportunistic disinflation and two financial crises and a demographic decline. I would really like to see whether the correlation remains if you strip out Europe. Convergence driven by stagnation is not good! It is actually very bad.

Still, I'm quite bullish on Africa. I don't think the Washington Consensus policies which have been adopted since the 90s are going to produce any Taiwans or South Koreas, but they might give us some Middle Income countries that consistently grow GDP about 2-3% ahead of population growth and slowly eradicate poverty. Kenya appears to be heading this way, and Ghana and Botswana too. I'm quite skeptical Africa will quickly make the leap and end up looking like North Asia, but if it ended up looking like Latin America that would be a really significant change.

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But Patel et al. show that the convergence isn't due to developed countries slowing down, but to developing countries speeding up!

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The path to Salvation for Bangla,is PRC. They have to let the PRC invest in the Gas and Power infra sector,to produce power at the LOWEST COST IN ASIA.In the time to set up the capacities,the ports can be deep dredged and the road infra be put in order.Once that is in place – the lowest cost manufacturing in THE WORLD,will be in Bangladesh.

The Edge of Bangladesh,is Gas and the Sea (which makes for Offshore wind and tidal,low freight costs) – and combine that,with the power potential in Myanmar – and its cross border wheeling.

The only issue is the rising sea and the soft soil – and so,manufacturing will need to move into the interiors,or power can be wheeled to Myanmarese SEZs.The Bangla success,will wipe out the ENTIRE MANUFACTURING INDUSTRY IN NORTH EAST INDIA,AND THE ENTIRE EAST COAST OF INDIA.

Basically the Bangla state,has to allow Chinese,Korean and Japanese SEZs on an unrestricted basis,with limited NFE and Taxation – and the Taka will overshoot the Thai Baht and Peso,in 5 -10 years.

That will complete the Chinese Triad and the Chinese Parallel in South Asia.

The Chinese Triad is CPEC,Lanka SEZ and the Bangaladesh SEZ.Industry and manufacturing will migrate from Pakistan to Lanka to Chittagong ,on a value addition mode,on an absolute basis.Dhaka will lose its LDC soon,and so,those units can be relocated in Lanka or CPEC. So Chinese SEZ in Bangla,Lanka and CPEC will wipe out the industry in the East,West and South of India – and the impact of that on banking, unemployment and inflation in India,is obvious.

So there is a successful Chinese SEZ Triad

The Chinese Parallel is a line from CPEC to the Deep Draft Port of Myanmar,with its SEZ.The intersection of the Chinese Parallel and the Chinese Triad,is the CRUCIFIXION of the Satanic nation of Hindoosthan

East Bengal,Assam,Tripura and Manipur belong to Bangladesh.The 1st Ahom king was a Chinese,Arunachal are Hans and the rest are South Tibetans,and so,North East belongs to China

Bangladesh ports are the IDEAL PORT TO BYPASS MALACCA,and exit the LOGISTICS TRAP OF THE US NAVY.It is a better option to Gwadar. Then come the ports in Myanmar,and then comes in Gwadar.Gwadar is viable,when Kashmir is an independent nation, Afghan is under Taliban rule (as a US puppet,can block Chinese logistics) and Baloch is under Control.

That provides the pretext to the Chinese,to station the PLN,in The Bay of Bengal,Arabian Sea and build Artificial Islands in the Bay of Bengal, and Indian Ocean.

Once North East India is lost – the Indian weasels will give up Kashmir and Uttarakhand

Hence,the Chinese logistics and economic security strategy,will provide salvation to the People of Pakistan, Bangladesh,Lanka and Myanmar. This is providence and salvation.

A Mahayana Buddhist nation (PRC) is providing salvation to 2 Islamic nations and 2 nations of Theravada or Hinayana Buddhism. dindooohindoo

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You are incredibly brave,Matt, to take on those who insist that nothing good could come from Western capitalism. You’ll be crucified.

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"If this keeps up, in another 30 years Southeast Asia will join Europe, North America, and Northeast Asia among the ranks of regions that everyone agrees are economically developed."

No. The largest country in it, Indonesia, has no chance of becoming a developed country. Thailand, its second-largest economy and the one that first started economic convergence with the West, has stalled out at around 30% of US GDP per capita by PPP. Maybe it will rise to 35%, but it'll never become a developed country. Malaysia seems likely to stall out at less than 50% of U.S. GDP per capita by PPP. The real reason these countries are growing so fast is that they missed out on the upper-middle-income country growth wave of the 1950s and 1960s and are now catching up to their position relative to Italy and Japan they had in the 1930s.

More interesting than Southeast Asia is Southeastern Europe -Ukraine, Romania, Serbia, etc. Central America is also interesting, as it's subject to largely the same economic forces as the Philippines.

"The Global South" is largely synonymous with "regions with an average IQ below 92" (with the exceptions of some Southeastern European countries with average IQs in the high 80s and China and Vietnam, which have average IQs in the 90s). Economic convergence between the poor countries and the rich countries with the exception of SSA will end by 2050, by 2100 if SSA is not excluded. Latin America was just the first region of the world to halt economic convergence with the developed countries since their nineteenth century agriculture was unusually productive relative to most third world. It won't be the last.

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There is no reason to assume that average IQ is static and cannot rise with development.

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People who write forum posts about IQ have confused themselves into thinking "heritable" means "genetic", so they think IQ effects last more than one generation, but they don't.

That's assuming this data is even true, which it probably isn't. The numbers they're quoting for "average IQ" are more likely to just be made up than come from actual tests.

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I'll keep my observations brief. Indonesia's power comes from the sheer size of its population, currently they are not nearly as developed (GDP/Capita PPP) as Thailand and Malaysia (which borders Singapore). Secondly, ASEAN countries seem to prosper regardless of political regime .. although I think the military in Myanmar really shot economic growth in the head, for the multiple ethnicities living in that former British colony (unlike the Kingdom of Siam).

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Yep. Countries tend to slow as they get richer. But check out Malaysia, which has managed to sustain exponential-shaped growth even as it approaches $30k/person. That's what we like to see!

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That's due to the southeastern Chinese community there. Similarly, China's Southeast is driving China forward.

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By induction, the key to economic development is having a southeast.

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Um, you’re neglecting the effects of compounding.

$10k compounded at 6% will become greater than $60k compounded at 2% in less than 50 years (try it out with a compounding calculator).

Now, granted, China probably will not compound at 6% for 50 years (because of awful demographics), the effects of compounding are real, and as Malaysia has shown, enough to lift a country in to middle-income and then developed world status.

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