Apr 20, 2023·edited Apr 20, 2023Liked by Noah Smith
I disagree with Noah, I think he's too bullish on Africa, specifically Sub-Saharan Africa. To quote a recent post on AE
"from 1960 to 2021, real per capita GDP grew 46 times in China, over 5 times in India, 158% in Latin America, and only 40% in Subsaharan Africa. In a closer time period, from 1990 to 2021 CEE countries increased their real per capita GDP by 144% (starting from a much higher point as well) while SSA, again, only grew by 24%."
A lot of the countries that had major issues in the past but ended up successful, like China, Taiwan, Korea, still had existing systems, people, culture, and foreign factors that could be turned to facilitate economic growth.
Currently a lot of SS Africa is like 'Haiti-lite' where nearly everything on every level has been utterly disorganized and corrupt for decades; there isn't really a place to start without a total reorganization of everything, or a miracle. It also feeds on itself; being surrounded by corrupt, poor, and unstable states is not conducive to success.
Africa is definitely going to be the hardest case, but right now I'm really bullish on South Asia, which currently has more people as the entire continent of Africa! So I say we keep working on the basics in Africa -- education, health, stable governance, etc. -- while pushing an industrialization boom in South Asia.
I see your point, Bangladesh and India are definitely looking to be on a good path, as is a lot of Southeast Asia.
In that sense I definitely agree that the age of global development is not over, it's just really unfortunate that there remain swathes that have severe issues that don't seem to be getting that much better (well they do but the pace at which they do is way too slow especially in order to not get even worse on a relative comparison).
Morocco seems to be doing a good job industrializing. They make an assembly station for cars in Europe, aerospace for America, and soon to be EVs for China.
Morocco is not Sub-Saharan, though. There are good reasons why most measures of regions group Maghreb and Egypt with Middle East rather than with Sub-Saharan Africa.
There are a lot of states in SS Africa that are poorer than Haiti and I don't disagree that many African states will still be messed up probably 20 years from now (Eritrea, Burundi, Sierra Leone, Gambia, Niger, the cocaine state Guinea-Bissau).
Luckily those states are small.
But there are many other African countries where with another oil/commodity boom can make it to high income status..look at the african petro states: Gabon & Angola.
Gabon is already an upper middle income country like Brazil, despite rapid corruption. Angola was temporarily upper middle income and now it's just lower middle but nonetheless it graduated from low income to middle income quickly after being rampaged by a civil war that started in 1974 and ended in 2002.
The development path of those African countries will probably look more like gulf states than like east Asian nations.
The future is not the past. From 1949-1978, per capita GDP growth in China was, shall we say, not good.
Now granted, the CCP did stamp out corruption and raised education in China, but education is also rising in Africa (and S Asia), even if not as fast as in China. And no, I'd say large parts of Sub-Saharan Africa, while it definitely has problems, definitely is not the basket case Haiti is (or even China was).
Look at China from 1911-1949: riven by invasion, wars, barbaric warlords, and corruption (and desperately poor; also mostly illiterate). Yet that did not predict the economic growth after 1978. I don't think the first half of the 21st century is Africa's time to shine but that doesn't mean the second half of this century won't be.
Yes. You can go all the way back to the start of the century of humiliation in the 1830s. The West had been racing ahead while China fell further and further behind for 140 years. Then they had an amazing period of 10% annual GDP growth from 1978-2011.
South Korea's growth has continued strong, but Taiwan's has slowed down in recent decades. Why has Korea been able to keep growing incomes fast when Taiwan has slowed?
I don't want to exaggerate the comparison. Taiwan's growth is still equal to or faster than developed countries, and Korea, while growing faster than today's Taiwan, is still far from the rocket-speed growth both countries had in the 1980s. But these are economically two very similarly positioned countries. You'd think they'd face the same laws of economic gravity. Yet Korea somehow has been able to sustain above-trend growth for 20 years longer than Taiwan.
"How countries get rich" attracts one-size-fits-all explanations, but in this case we have two countries, both growing, but obviously with some kind of important difference to Korea's benefit. If there was a reason for Korea's recent outperformance over Taiwan, it'd be worth knowing.
Simply put, South Korea has the Chaebols and Taiwan does not. While economic development strategies of Taiwan are remarkably similiar (export-oriented industrial policy with support for domestic industries by government, through cheap loans and market protections), the main difference in strategy is that South Korea went "big" (gov't funneled resources/protections to quasi-state owned enteprises called Chaebol) while Taiwan went small. There are a lot of costs involved in Korea's strategy (most notably, it's rather inefficient), but in the long run, Korea has the ecomomic powerhouse like Hyundai, Samsung to aggressively drive development from the upper-middle class into the upper class.
I am a little too optimistic, and think occasional doses of pessimism will do me good. Especially reminders that nation building doesn't happen on auto-pilot, and development is not guaranteed. But I couldn't believe that Odd Lots episode. Their talking points seemed not just negative about the future, but also contrary to my understanding about the past. While the podcast is mostly a talk show, and Tracy and Joe never do argumentative episodes, it felt like they were too ready to be believe everything the guest said.
I think the overall macro effect is that african countries need commodity booms for their nationalized commodity firms to gain more revenue and with more revenue, despite corruption, will lead to more ability to invest in infrastructure, public health, and etc. The hard part is that commodity booms strengthen currencies and make their manufacturing uncompetitive - Dutch disease. Asian nations barely had any natural resources so they never had the counter problem of commodity booms making manufacturing uncompetitive there.
Just like when China hit $4000 USD per person at the year 2000(not ppp but market rates), it lead to a massive feedback effect of consumption and investment leading to global demand of goods. Now China is at $13K at current exchange rates. . India needs the same (ppp India is at $7000 but at current exchange rates its more like $2200 income per person)
Countries like Guinea export aluminum which is now where near historic highs.
Once India becomes a massive buyer of commodities and increase their growth of commodities each year faster than countries can produce/mine those materials, commodities will spike and really, super poor nations like Guinea can grow.
Doesn't the China example show that a country doesn't need a commodity boom to grow? Seems like education and getting on the manufacturing treadmill is key.
2) as for education- everyone invests in education..but it's not just academic education that builds good workers it's also industrial education when you work. Cuba and Soviet Union had great educational systems but they still had shit industrial sectors. The true know how comes from industrial + academic education, which comes from a synergy of military/gov spending -->research institutions promoting miltiary/gov--> industry producing commerical offshoots from the initial gov/military use cases. The best example of that is silicon valley.
If a commodity boom raises the value of your nation's currency and now your subpar central african car doesn't get bought because the rich in that country prefer BMWs even with tarriffs, well your domestic car firm dies/or needs infinite gov subsidies. Also, mechanical engineering department can't complement the growth of car sector in your country.
That's my point. If you don't have massive natural resources to export, you don't need to depend on the global market of copper being $70 this year and copper being $10 5 years from now.
When commodities boom, it does great for commodity producers but kills their manufscutifng sectors since as commodities increase --> your currency gets stronger --> its cheaper to import manufactured goods -& your manufacturing exports get too expensive. (Dutch disease)
When commodities are strong, the exporter can boost exports and gov revenues but manufacturing declines. When commodities are weak that's the time to build manufacturing (except you start at a tiny base).
If you don't have many commodities to export (South Korea, China, Japan) you don't get flushed with revenues whether commodities or high or low. You basically have to grow rich through value added manufacturing.
From my vantage point in India, I'd say the reality may be somewhere in the middle of your two divergent perspectives. It is true that Indian growth has been a lot faster post 1990 than in the 3 decades prior. Yet, I can empathize with arguments around why the East Asian manufacturing miracle cannot be replicated here - the 'democracy tax' has a big role to play.
India is beset with 'first world problems' like NIMBYism, environmental over-activism, continued labour-law related inflexibility that will all only increase; even if its infamous shambolic infrastructure picks up. Thus India manages to do well only in services, where its famed entrepreneurs can sidestep these problems and sell to the world. Even services will come under pressure with AI.
In short, the future looks better than the past, but no runaway growth to be seen here. This is despite probably the best political and social stability among the developing world with no major wars for a long time. Other emerging economies would likely do worse on one or more of the dimensions - war, social strife, hyper inflation, famine / drought. Thus, the weighted average growth will not look great
Excellent but my point enquiring for your thoughts is a bit different.
It is not on Economic development but Economic Development economics.
I used to follow think tank and individual Economic Development economists on their www web platform, several years ago.
These blogs were well worth reading and had highly interactive comments sections. But now the www platforms just generate no interest. The comments sections are dead. Is it because people now use more modern social media platforms like twitter, facebook, whatever.
Further individual Development Economics economists have moved away from the field. They now still write on third world issues but not about Development Economics or it is with some tenuous connection.
Prof Krugman, with I think, other mainstream economists, questioned in the past is Development economics an actual thing at all.
Finally Development Economists were supposed to fix these countries so that they became normal functioning economies to the benefit of their citizens. They have failed and now basically tell people to emigrate. This failure may be resulting in a lack of interest or the economists themselves moving to other fields of interest.
It is a long way of saying is Development Economics now dead as a discipline or just Much reduced.
One of the most interesting notes in the post is this:
"But around 1990, Patel et al. find that things flipped — suddenly, there was a negative correlation between a country’s income and its growth rate, just like economic theory says there should be. "
If people were to offer an interpretation would it be:
1) That from the 50s-80s there was a lot of enthusiasm for international development. In the last 30 years there's been more skepticism, but those critiques have had an impact and we are now smarter about international development.
2) The Cold War was bad for international development, and the end of the Cold War was a boon?
Negative headlines and dire predictions sell better than hopeful ones. Plus, the fact that your articles are loaded with facts and caveats makes me lean in your direction. Trends are very hard to detect when they first start, and once established, people look back and say, "Of course, we saw this coming."
The most significant unknown that you didn't really address is the political aspect and its effects on world affairs. All bets are off if China invades Taiwan or the war in Ukraine escalates, or a major world leader dies. As Yogi Berra said, "It's tough to make predictions, especially about the future."
BTW, thanks for reminding me about 'phlogiston'. It's been a long time since I saw that word.
Depends on your definition of boom. In particular, does "restoratory growth" (rebuilding destroyed factories and stuff like that) count just the same as growth otherwise?
You can say that now with the clarity of hindsight, but during the war and at the end of the war, things were not so certain. We had the iron curtin, Russia's desire for territory, the fall of China into the communist world, and finally Korea. Any one of these developments could have derailed what became a long economic boom. I'll stick with Yoggi.
It didn't seem certain because human beings evolved in millions of years where there was plenty to be reasonably fearful of and life did not improve for hundreds of generations, so your brain naturally thinks it's only luck that things turned out so well. Yet history has shown that economic improvement has gone up like a hockey stick since the first industrial revolution. If anything, your examples prove the point: the Iron Curtain went up, China underwent decades of Communist/Maoist dysfunction, yet general improvement for the average human on Earth still went up like a hockey stick.
I would contend that economics is dependent on sociology and politics. Your example of East Asia rocketing to the top while much of Africa remains mired in poverty can be viewed as differences in social structure support for modern economic development. Rapid economic growth can easily overwhelm rickety governments and social systems. Simply throwing money at the problem is not the answer and, as we have discovered in Africa and S. America, can make it worse.
China has been criticized for its Belt & Road Initiative but, perhaps because they only recently emerged from poverty, they seem to prioritize the need for infrastructure development before attempting larger scale industrial economic development. The Chinese have the patience to pace their investment programs to allow their poor neighbors a generation or two to develop their educational and governmental basics before attempting to introduce overwhelming modern manufacturing, mining, and agricultural innovations.
I remember reading about the frustrations of the U.S. military in Afghanistan because the literacy rate was only around 30%. I recently saw a shocking statistic of Pakistani overall literacy rate of only around 58%. How can a country hope to compete in the 21st century if almost half their population cannot read or write? I am sure many countries in Africa suffer from the same literacy deficit and with a growing population of displaced populations living in refugee camps with minimum resources for educating children, there is a huge bubble of technological illiterates with no skills needed for today's automated manufacturing and agriculture.
Discussions of economics without including social drivers are meaningless. Factories will not be built until the population can develop the necessary skills to operate them. China and East Asia have the sociological framework and pragmatic willingness to educate their populations to be competitive and likely trendsetters for the changes to come. They have a good blueprint for developing the basics needed to end poverty and to thrive in today's dynamic world.
China is certainly not alone with the dilemma of demographic aging. China, with their embrace of high technology and socialistic economic system might actually fare better than more individualistic economies lulled into complacency.
Human labor is diminishing as a driving component of manufacturing and wealth. Future factories operated by AI and robotics may need few humans to operate. Wealth redistribution will become increasingly important skill for governments faced with supporting large populations of aged and "down-sized" human labor workforce.
China has survived over the millennium because it is patient and adaptable. Few have withstood the tests of time as they have done and they probably have much to teach the rest of us.
I'll just repaste and note that many Westerners (and Chinese!) in the first half of the 20th century thought that the social structure of traditional Chinese society just wouldn't allow it to catch up with the West:
The future is not the past. From 1949-1978, per capita GDP growth in China was, shall we say, not good.
Now granted, the CCP did stamp out corruption and raised education in China, but education is also rising in Africa (and S Asia), even if not as fast as in China. And no, I'd say large parts of Sub-Saharan Africa, while it definitely has problems, definitely is not the basket case Haiti is (or even China was).
Look at China from 1911-1949: riven by invasion, wars, barbaric warlords, and corruption (and desperately poor; also mostly illiterate). Yet that did not predict the economic growth after 1978. I don't think the first half of the 21st century is Africa's time to shine but that doesn't mean the second half of this century won't be.
They were correct. Social structures of traditional Chinese society were torn out and destroyed (in different ways on Taiwan and on the continent), and only after that did something change.
Japan had the destruction of WWII and U.S. occupation to reset and jump start their social and education systems. S. Korea had the Korean War and U.S. support to reset their economy and industrialize. China had the disruptive period of Mao's Cultural Revolution which destroyed the old feudal ways and paved the way for Deng's reforms.
I will also add that East Asia has a common culture of Confucian philosophy which, like the Western Protestant work ethic, set the foundation of order, hard work, and education. It helps to have a cultural basis that fits the style of modern capitalism and globalism.
Yes, yes, these days, Confucian culture is lauded, but if you were around a century ago or read Chinese writings from that period (you clearly haven’t), Confucian culture was seen by many Chinese as an impediment to progress and improvement. Which means “Confucian culture”, like the “Protestant work ethic” is just a pat just-so story to justify a rise that has already happened. Just like “Hindutava” or something will explain the rise of India in the future and there will be some story that the gullible will buy to explain the rise of Africa in the future.
Confucian "culture" is different from Confucianism. The cultural aspects of Confucian philosophy are embedded deeply in Chinese and other Asian cultures with deep respect for order, hierarchy, and education. These core principles do not change with the prevailing trends of politics and economics.
There is of course a difference between Hinduism (one of the core sociologies of India) and Hindutava which is a recent fascist right wing movement to erase other cultural influences from Indian culture. India is still reeling from hundreds of years of colonization by Persian Moguls and later by the British Raj. Like Africa and S. America, it is a country seeking to reclaim its core principles beneath the layers of colonial pillaging. A pluralistic form of Hinduistic culture will likely prevail and serve India well in a globalized world. Muslim Pakistan may not fare as well culturally.
And how is it not a just-so story when that same respect for order, hierarchy, and classical education was blamed by the young Chinese of a century ago for holding China back?
Easy. Respect for order and hierarchy is an impediment when combined with an already old-and-rigid structure but a boon when combined with a set-for-development structure. (Or, in other words, "autocracy with bad autocrats is bad, autocracy with good autocrats is good", where "bad" and "good" implies "for economy" rather than morally.)
Also, if the Protestant work ethic is as important as you claim, then at least parts of SS Africa are poised for economic takeoff as a decent percentage of SS Africans are Protestant (the majority of SS Africans are Christian though I can’t find the breakdown between Catholic and Protestant, though I’m pretty certain the Protestant British had colonized a greater percent of the population of SS Africa than did the Catholic French and Belgians).
Protestant work ethic is sociological not religious. Protestants believed each person was responsible for their own salvation and had to read the Bible for themselves. This fostered a strong tradition of literacy and mandatory primary education in Northern Europe and North America.
Africa and much of S.E. Asia were colonized and their population was not considered to be equal and in no real need of education. Keeping them barefoot and illiterate was standard operating procedure for Imperial times. Much of S. America is still mired in Spanish/Portugese colonialism with a rigid class disparity between the 'white' Europeans and low class indigenous citizens.
"In Latin America, nearly 35 million people over the age of 15 cannot read or write; an average of 10 %. This average doubles in Honduras, El Salvador and Nicaragua, trebles in Guatemala, reaches 50 % in Haiti and falls to around 4 % in Cuba, Argentina and Uruguay."
Yes, except in Africa Protestantism was a colonial implant rather than a core sociological element. Also, Africa is a continent rather than a cohesive country with a common history. Many Africans still see themselves through the lens of tribal history and culture.
I think the elephant in the room here is that if an observer in 1945 predicted that national wealth would converge between countries with similar ancestry, they'd have a pretty good picture of what the the world would look like in 2023. Whereas these appeals to economic institutions can't explain very much about global trends in the last 80 years.
It’s possible that we are evaluating emerging economies based on old metrics. With increasing automation and the rise of AI technologies, industrialization may not be a significant driver for poverty reduction in emerging economies.
On the other hand, eco-restoration and management could become enormous generators of employment (and so prosperity). Significantly, the cost-of-entry is close to zero; if a regulatory framework is established (e.g. exchange markets for carbon and biodiversity), then eco-restoration and management become valuable activities, contributing to overall economic growth. Note that this economic value exists independent of human population trends, and so is still present with a declining human population.
In this way, conventionally conceived industrial policy is not needed in the initial stages of emerging economies. However, it remains useful for ongoing broad based economic development.
“The proper perspective here, I think, is to realize that economic development was always hard, and always slow, and always uneven and uncertain.” That’s the best prediction of all.
Look at how declining fertility rates have been correlated to income growth and better health statistics. (WDI for data). Also relevant to talk about EROI. If solar EROI can match or exceed fossil fuel EROI, then the world can all be rich. Finally, the assumption that natural resources--the scale of the planet--is not limiting, is no longer true. Soils, climate, fossil fuels, minerals, toxic sink capacity, all limited on a finite planet with 8 billion people. If population growth had stopped at 4 billion we would all be better off. And "overshoot and collapse" may be the best guess about human population dynamics.
The "Earth is finite" argument always struck me as immensely dumb. Yes, the planet is finite, but how do you know that the potential carrying capacity of this planet isn't 500 billion humans?
While that may seem ridiculous to you, I'm certain the idea that the Earth could support 8 billion humans seemed completely out of touch with reality to anyone alive when there were only 500 million humans on this planet.
I disagree with Noah, I think he's too bullish on Africa, specifically Sub-Saharan Africa. To quote a recent post on AE
"from 1960 to 2021, real per capita GDP grew 46 times in China, over 5 times in India, 158% in Latin America, and only 40% in Subsaharan Africa. In a closer time period, from 1990 to 2021 CEE countries increased their real per capita GDP by 144% (starting from a much higher point as well) while SSA, again, only grew by 24%."
A lot of the countries that had major issues in the past but ended up successful, like China, Taiwan, Korea, still had existing systems, people, culture, and foreign factors that could be turned to facilitate economic growth.
Currently a lot of SS Africa is like 'Haiti-lite' where nearly everything on every level has been utterly disorganized and corrupt for decades; there isn't really a place to start without a total reorganization of everything, or a miracle. It also feeds on itself; being surrounded by corrupt, poor, and unstable states is not conducive to success.
Africa is definitely going to be the hardest case, but right now I'm really bullish on South Asia, which currently has more people as the entire continent of Africa! So I say we keep working on the basics in Africa -- education, health, stable governance, etc. -- while pushing an industrialization boom in South Asia.
I see your point, Bangladesh and India are definitely looking to be on a good path, as is a lot of Southeast Asia.
In that sense I definitely agree that the age of global development is not over, it's just really unfortunate that there remain swathes that have severe issues that don't seem to be getting that much better (well they do but the pace at which they do is way too slow especially in order to not get even worse on a relative comparison).
Morocco seems to be doing a good job industrializing. They make an assembly station for cars in Europe, aerospace for America, and soon to be EVs for China.
https://yawboadu.substack.com/p/moroccos-development-process
Morocco is not Sub-Saharan, though. There are good reasons why most measures of regions group Maghreb and Egypt with Middle East rather than with Sub-Saharan Africa.
There are a lot of states in SS Africa that are poorer than Haiti and I don't disagree that many African states will still be messed up probably 20 years from now (Eritrea, Burundi, Sierra Leone, Gambia, Niger, the cocaine state Guinea-Bissau).
Luckily those states are small.
But there are many other African countries where with another oil/commodity boom can make it to high income status..look at the african petro states: Gabon & Angola.
Gabon is already an upper middle income country like Brazil, despite rapid corruption. Angola was temporarily upper middle income and now it's just lower middle but nonetheless it graduated from low income to middle income quickly after being rampaged by a civil war that started in 1974 and ended in 2002.
The development path of those African countries will probably look more like gulf states than like east Asian nations.
Economic/political history of Gabon
https://open.substack.com/pub/yawboadu/p/the-economy-and-history-of-gabon?utm_source=share&utm_medium=android
Economic/political history of Angola :
https://open.substack.com/pub/yawboadu/p/angola?utm_source=share&utm_medium=android
The future is not the past. From 1949-1978, per capita GDP growth in China was, shall we say, not good.
Now granted, the CCP did stamp out corruption and raised education in China, but education is also rising in Africa (and S Asia), even if not as fast as in China. And no, I'd say large parts of Sub-Saharan Africa, while it definitely has problems, definitely is not the basket case Haiti is (or even China was).
Look at China from 1911-1949: riven by invasion, wars, barbaric warlords, and corruption (and desperately poor; also mostly illiterate). Yet that did not predict the economic growth after 1978. I don't think the first half of the 21st century is Africa's time to shine but that doesn't mean the second half of this century won't be.
Yes. You can go all the way back to the start of the century of humiliation in the 1830s. The West had been racing ahead while China fell further and further behind for 140 years. Then they had an amazing period of 10% annual GDP growth from 1978-2011.
South Korea's growth has continued strong, but Taiwan's has slowed down in recent decades. Why has Korea been able to keep growing incomes fast when Taiwan has slowed?
I don't want to exaggerate the comparison. Taiwan's growth is still equal to or faster than developed countries, and Korea, while growing faster than today's Taiwan, is still far from the rocket-speed growth both countries had in the 1980s. But these are economically two very similarly positioned countries. You'd think they'd face the same laws of economic gravity. Yet Korea somehow has been able to sustain above-trend growth for 20 years longer than Taiwan.
"How countries get rich" attracts one-size-fits-all explanations, but in this case we have two countries, both growing, but obviously with some kind of important difference to Korea's benefit. If there was a reason for Korea's recent outperformance over Taiwan, it'd be worth knowing.
Noah, any ideas?
Is this also true in PPP terms? Angus Maddison shows Taiwan outpacing South Korea since 2000.
https://ourworldindata.org/grapher/gdp-per-capita-maddison-2020?tab=chart&stackMode=relative&time=2001..2018&country=TWN~KOR
World Bank doesn't have data on Taiwan, and this series ends in 2018, so not 100% sure what's going on since the pandemic hit.
With the China threat and Nixon, Taiwan investment slowed. S Korea has our full military support
Simply put, South Korea has the Chaebols and Taiwan does not. While economic development strategies of Taiwan are remarkably similiar (export-oriented industrial policy with support for domestic industries by government, through cheap loans and market protections), the main difference in strategy is that South Korea went "big" (gov't funneled resources/protections to quasi-state owned enteprises called Chaebol) while Taiwan went small. There are a lot of costs involved in Korea's strategy (most notably, it's rather inefficient), but in the long run, Korea has the ecomomic powerhouse like Hyundai, Samsung to aggressively drive development from the upper-middle class into the upper class.
Thanks for the timely post.
I am a little too optimistic, and think occasional doses of pessimism will do me good. Especially reminders that nation building doesn't happen on auto-pilot, and development is not guaranteed. But I couldn't believe that Odd Lots episode. Their talking points seemed not just negative about the future, but also contrary to my understanding about the past. While the podcast is mostly a talk show, and Tracy and Joe never do argumentative episodes, it felt like they were too ready to be believe everything the guest said.
I think the overall macro effect is that african countries need commodity booms for their nationalized commodity firms to gain more revenue and with more revenue, despite corruption, will lead to more ability to invest in infrastructure, public health, and etc. The hard part is that commodity booms strengthen currencies and make their manufacturing uncompetitive - Dutch disease. Asian nations barely had any natural resources so they never had the counter problem of commodity booms making manufacturing uncompetitive there.
Just like when China hit $4000 USD per person at the year 2000(not ppp but market rates), it lead to a massive feedback effect of consumption and investment leading to global demand of goods. Now China is at $13K at current exchange rates. . India needs the same (ppp India is at $7000 but at current exchange rates its more like $2200 income per person)
Countries like Guinea export aluminum which is now where near historic highs.
https://tradingeconomics.com/commodity/aluminum
Once India becomes a massive buyer of commodities and increase their growth of commodities each year faster than countries can produce/mine those materials, commodities will spike and really, super poor nations like Guinea can grow.
Economic/geopolitical of history of Guinea
Guinea
https://open.substack.com/pub/yawboadu/p/the-economics-and-geopolitics-of?utm_source=share&utm_medium=android
Doesn't the China example show that a country doesn't need a commodity boom to grow? Seems like education and getting on the manufacturing treadmill is key.
2) as for education- everyone invests in education..but it's not just academic education that builds good workers it's also industrial education when you work. Cuba and Soviet Union had great educational systems but they still had shit industrial sectors. The true know how comes from industrial + academic education, which comes from a synergy of military/gov spending -->research institutions promoting miltiary/gov--> industry producing commerical offshoots from the initial gov/military use cases. The best example of that is silicon valley.
If a commodity boom raises the value of your nation's currency and now your subpar central african car doesn't get bought because the rich in that country prefer BMWs even with tarriffs, well your domestic car firm dies/or needs infinite gov subsidies. Also, mechanical engineering department can't complement the growth of car sector in your country.
That's my point. If you don't have massive natural resources to export, you don't need to depend on the global market of copper being $70 this year and copper being $10 5 years from now.
When commodities boom, it does great for commodity producers but kills their manufscutifng sectors since as commodities increase --> your currency gets stronger --> its cheaper to import manufactured goods -& your manufacturing exports get too expensive. (Dutch disease)
When commodities are strong, the exporter can boost exports and gov revenues but manufacturing declines. When commodities are weak that's the time to build manufacturing (except you start at a tiny base).
If you don't have many commodities to export (South Korea, China, Japan) you don't get flushed with revenues whether commodities or high or low. You basically have to grow rich through value added manufacturing.
From my vantage point in India, I'd say the reality may be somewhere in the middle of your two divergent perspectives. It is true that Indian growth has been a lot faster post 1990 than in the 3 decades prior. Yet, I can empathize with arguments around why the East Asian manufacturing miracle cannot be replicated here - the 'democracy tax' has a big role to play.
India is beset with 'first world problems' like NIMBYism, environmental over-activism, continued labour-law related inflexibility that will all only increase; even if its infamous shambolic infrastructure picks up. Thus India manages to do well only in services, where its famed entrepreneurs can sidestep these problems and sell to the world. Even services will come under pressure with AI.
In short, the future looks better than the past, but no runaway growth to be seen here. This is despite probably the best political and social stability among the developing world with no major wars for a long time. Other emerging economies would likely do worse on one or more of the dimensions - war, social strife, hyper inflation, famine / drought. Thus, the weighted average growth will not look great
Dunno about it. Japan was also "democratic" during its post-WWII boom (granted, always the same party in power, but that may be true in India too).
Excellent but my point enquiring for your thoughts is a bit different.
It is not on Economic development but Economic Development economics.
I used to follow think tank and individual Economic Development economists on their www web platform, several years ago.
These blogs were well worth reading and had highly interactive comments sections. But now the www platforms just generate no interest. The comments sections are dead. Is it because people now use more modern social media platforms like twitter, facebook, whatever.
Further individual Development Economics economists have moved away from the field. They now still write on third world issues but not about Development Economics or it is with some tenuous connection.
Prof Krugman, with I think, other mainstream economists, questioned in the past is Development economics an actual thing at all.
Finally Development Economists were supposed to fix these countries so that they became normal functioning economies to the benefit of their citizens. They have failed and now basically tell people to emigrate. This failure may be resulting in a lack of interest or the economists themselves moving to other fields of interest.
It is a long way of saying is Development Economics now dead as a discipline or just Much reduced.
One of the most interesting notes in the post is this:
"But around 1990, Patel et al. find that things flipped — suddenly, there was a negative correlation between a country’s income and its growth rate, just like economic theory says there should be. "
If people were to offer an interpretation would it be:
1) That from the 50s-80s there was a lot of enthusiasm for international development. In the last 30 years there's been more skepticism, but those critiques have had an impact and we are now smarter about international development.
2) The Cold War was bad for international development, and the end of the Cold War was a boon?
3) Some other historical contingency?
"saying that countries have been deindustrializing except for Asia is a little like saying “Other than that, Mrs. Lincoln, how was the play?”."
😂😂😂🤣🤣🤣👍🏽
Negative headlines and dire predictions sell better than hopeful ones. Plus, the fact that your articles are loaded with facts and caveats makes me lean in your direction. Trends are very hard to detect when they first start, and once established, people look back and say, "Of course, we saw this coming."
The most significant unknown that you didn't really address is the political aspect and its effects on world affairs. All bets are off if China invades Taiwan or the war in Ukraine escalates, or a major world leader dies. As Yogi Berra said, "It's tough to make predictions, especially about the future."
BTW, thanks for reminding me about 'phlogiston'. It's been a long time since I saw that word.
Nah, bets still not off. WWII was tremendously destructive but still led to a long boom afterwards.
And World War 1 was followed by the Great Depression.
WWI was followed by a huge boom. The Great Depression followed after that.
Seems that you forgot all about the Roaring 20’s.
But the bigger point is that even the Great Depression was just a short-term blip in the long-run.
https://www.visualizingeconomics.com/blog/2010/11/03/us-gdp-1871-2009
The 1920s was a lot less roaring for Europe. Some countries did well, others... less so.
Depends on your definition of boom. In particular, does "restoratory growth" (rebuilding destroyed factories and stuff like that) count just the same as growth otherwise?
You can say that now with the clarity of hindsight, but during the war and at the end of the war, things were not so certain. We had the iron curtin, Russia's desire for territory, the fall of China into the communist world, and finally Korea. Any one of these developments could have derailed what became a long economic boom. I'll stick with Yoggi.
It didn't seem certain because human beings evolved in millions of years where there was plenty to be reasonably fearful of and life did not improve for hundreds of generations, so your brain naturally thinks it's only luck that things turned out so well. Yet history has shown that economic improvement has gone up like a hockey stick since the first industrial revolution. If anything, your examples prove the point: the Iron Curtain went up, China underwent decades of Communist/Maoist dysfunction, yet general improvement for the average human on Earth still went up like a hockey stick.
I would contend that economics is dependent on sociology and politics. Your example of East Asia rocketing to the top while much of Africa remains mired in poverty can be viewed as differences in social structure support for modern economic development. Rapid economic growth can easily overwhelm rickety governments and social systems. Simply throwing money at the problem is not the answer and, as we have discovered in Africa and S. America, can make it worse.
China has been criticized for its Belt & Road Initiative but, perhaps because they only recently emerged from poverty, they seem to prioritize the need for infrastructure development before attempting larger scale industrial economic development. The Chinese have the patience to pace their investment programs to allow their poor neighbors a generation or two to develop their educational and governmental basics before attempting to introduce overwhelming modern manufacturing, mining, and agricultural innovations.
I remember reading about the frustrations of the U.S. military in Afghanistan because the literacy rate was only around 30%. I recently saw a shocking statistic of Pakistani overall literacy rate of only around 58%. How can a country hope to compete in the 21st century if almost half their population cannot read or write? I am sure many countries in Africa suffer from the same literacy deficit and with a growing population of displaced populations living in refugee camps with minimum resources for educating children, there is a huge bubble of technological illiterates with no skills needed for today's automated manufacturing and agriculture.
Discussions of economics without including social drivers are meaningless. Factories will not be built until the population can develop the necessary skills to operate them. China and East Asia have the sociological framework and pragmatic willingness to educate their populations to be competitive and likely trendsetters for the changes to come. They have a good blueprint for developing the basics needed to end poverty and to thrive in today's dynamic world.
https://www.google.com/search?client=safari&rls=en&q=literacy+rate+pakistan+vs+india&ie=UTF-8&oe=UTF-8
Will China be patient (to the tune of 1-2 generations) with their strong demographic headwinds coming?
China is certainly not alone with the dilemma of demographic aging. China, with their embrace of high technology and socialistic economic system might actually fare better than more individualistic economies lulled into complacency.
Human labor is diminishing as a driving component of manufacturing and wealth. Future factories operated by AI and robotics may need few humans to operate. Wealth redistribution will become increasingly important skill for governments faced with supporting large populations of aged and "down-sized" human labor workforce.
China has survived over the millennium because it is patient and adaptable. Few have withstood the tests of time as they have done and they probably have much to teach the rest of us.
I'll just repaste and note that many Westerners (and Chinese!) in the first half of the 20th century thought that the social structure of traditional Chinese society just wouldn't allow it to catch up with the West:
The future is not the past. From 1949-1978, per capita GDP growth in China was, shall we say, not good.
Now granted, the CCP did stamp out corruption and raised education in China, but education is also rising in Africa (and S Asia), even if not as fast as in China. And no, I'd say large parts of Sub-Saharan Africa, while it definitely has problems, definitely is not the basket case Haiti is (or even China was).
Look at China from 1911-1949: riven by invasion, wars, barbaric warlords, and corruption (and desperately poor; also mostly illiterate). Yet that did not predict the economic growth after 1978. I don't think the first half of the 21st century is Africa's time to shine but that doesn't mean the second half of this century won't be.
They were correct. Social structures of traditional Chinese society were torn out and destroyed (in different ways on Taiwan and on the continent), and only after that did something change.
Japan had the destruction of WWII and U.S. occupation to reset and jump start their social and education systems. S. Korea had the Korean War and U.S. support to reset their economy and industrialize. China had the disruptive period of Mao's Cultural Revolution which destroyed the old feudal ways and paved the way for Deng's reforms.
I will also add that East Asia has a common culture of Confucian philosophy which, like the Western Protestant work ethic, set the foundation of order, hard work, and education. It helps to have a cultural basis that fits the style of modern capitalism and globalism.
Yes, yes, these days, Confucian culture is lauded, but if you were around a century ago or read Chinese writings from that period (you clearly haven’t), Confucian culture was seen by many Chinese as an impediment to progress and improvement. Which means “Confucian culture”, like the “Protestant work ethic” is just a pat just-so story to justify a rise that has already happened. Just like “Hindutava” or something will explain the rise of India in the future and there will be some story that the gullible will buy to explain the rise of Africa in the future.
Imho, institutions>>>>culture.
Confucian "culture" is different from Confucianism. The cultural aspects of Confucian philosophy are embedded deeply in Chinese and other Asian cultures with deep respect for order, hierarchy, and education. These core principles do not change with the prevailing trends of politics and economics.
There is of course a difference between Hinduism (one of the core sociologies of India) and Hindutava which is a recent fascist right wing movement to erase other cultural influences from Indian culture. India is still reeling from hundreds of years of colonization by Persian Moguls and later by the British Raj. Like Africa and S. America, it is a country seeking to reclaim its core principles beneath the layers of colonial pillaging. A pluralistic form of Hinduistic culture will likely prevail and serve India well in a globalized world. Muslim Pakistan may not fare as well culturally.
And how is it not a just-so story when that same respect for order, hierarchy, and classical education was blamed by the young Chinese of a century ago for holding China back?
Easy. Respect for order and hierarchy is an impediment when combined with an already old-and-rigid structure but a boon when combined with a set-for-development structure. (Or, in other words, "autocracy with bad autocrats is bad, autocracy with good autocrats is good", where "bad" and "good" implies "for economy" rather than morally.)
Also, if the Protestant work ethic is as important as you claim, then at least parts of SS Africa are poised for economic takeoff as a decent percentage of SS Africans are Protestant (the majority of SS Africans are Christian though I can’t find the breakdown between Catholic and Protestant, though I’m pretty certain the Protestant British had colonized a greater percent of the population of SS Africa than did the Catholic French and Belgians).
Protestant work ethic is sociological not religious. Protestants believed each person was responsible for their own salvation and had to read the Bible for themselves. This fostered a strong tradition of literacy and mandatory primary education in Northern Europe and North America.
Africa and much of S.E. Asia were colonized and their population was not considered to be equal and in no real need of education. Keeping them barefoot and illiterate was standard operating procedure for Imperial times. Much of S. America is still mired in Spanish/Portugese colonialism with a rigid class disparity between the 'white' Europeans and low class indigenous citizens.
"In Latin America, nearly 35 million people over the age of 15 cannot read or write; an average of 10 %. This average doubles in Honduras, El Salvador and Nicaragua, trebles in Guatemala, reaches 50 % in Haiti and falls to around 4 % in Cuba, Argentina and Uruguay."
https://www.dvv-international.de/en/adult-education-and-development/editions/aed-712008/national-and-regional-reflections-on-operationalising-the-benchmarks/latin-america-literacy-adult-education-and-the-international-literacy-benchmarks
“Protestants believed each person was responsible for their own salvation and had to read the Bible for themselves.”
Which would apply just as well to African Protestants, yes?
Yes, except in Africa Protestantism was a colonial implant rather than a core sociological element. Also, Africa is a continent rather than a cohesive country with a common history. Many Africans still see themselves through the lens of tribal history and culture.
“Countries can change, and if you think they can’t, why are you giving policy advice?”
Noah was cooking in this article 🔥
I think the elephant in the room here is that if an observer in 1945 predicted that national wealth would converge between countries with similar ancestry, they'd have a pretty good picture of what the the world would look like in 2023. Whereas these appeals to economic institutions can't explain very much about global trends in the last 80 years.
What would happen if exporting or industrialized countries suddenly saw labor organizing for better conditions?
Comments from a non-economist:
It’s possible that we are evaluating emerging economies based on old metrics. With increasing automation and the rise of AI technologies, industrialization may not be a significant driver for poverty reduction in emerging economies.
On the other hand, eco-restoration and management could become enormous generators of employment (and so prosperity). Significantly, the cost-of-entry is close to zero; if a regulatory framework is established (e.g. exchange markets for carbon and biodiversity), then eco-restoration and management become valuable activities, contributing to overall economic growth. Note that this economic value exists independent of human population trends, and so is still present with a declining human population.
In this way, conventionally conceived industrial policy is not needed in the initial stages of emerging economies. However, it remains useful for ongoing broad based economic development.
“The proper perspective here, I think, is to realize that economic development was always hard, and always slow, and always uneven and uncertain.” That’s the best prediction of all.
Look at how declining fertility rates have been correlated to income growth and better health statistics. (WDI for data). Also relevant to talk about EROI. If solar EROI can match or exceed fossil fuel EROI, then the world can all be rich. Finally, the assumption that natural resources--the scale of the planet--is not limiting, is no longer true. Soils, climate, fossil fuels, minerals, toxic sink capacity, all limited on a finite planet with 8 billion people. If population growth had stopped at 4 billion we would all be better off. And "overshoot and collapse" may be the best guess about human population dynamics.
The "Earth is finite" argument always struck me as immensely dumb. Yes, the planet is finite, but how do you know that the potential carrying capacity of this planet isn't 500 billion humans?
While that may seem ridiculous to you, I'm certain the idea that the Earth could support 8 billion humans seemed completely out of touch with reality to anyone alive when there were only 500 million humans on this planet.
I would not wish for a collapse, but a gradual consensual decline would be the best thing going forward, for all the reasons you name.
Plus AI and robot pets ;-)