How do poor countries get rich?(thegoodblog.substack.com)
thegoodblog.substack.com
How do poor countries get rich?
https://thegoodblog.substack.com/p/how-do-poor-countries-get-rich
178 comments
> Countries like Japan, Taiwan, and South Korea that practiced land reform to wrench land away from idle landlords and distribute it widely, have had this success.
Land reform was one element. The other, despite the article's unqualified praise of "open up your economy to foreign investment and trade", is trade restrictions and various forms of state meddling to support local industries. I don't need to point out how difficult China makes it for foreign firms to operate in their local market. Per James Galbraith:
" ... none of the world's most successful trading regions, including Japan, Korea, Taiwan, and now mainland China, reached their current status by adopting neoliberal trading rules." - https://en.wikipedia.org/wiki/Comparative_advantage#Criticis...
Land reform was one element. The other, despite the article's unqualified praise of "open up your economy to foreign investment and trade", is trade restrictions and various forms of state meddling to support local industries. I don't need to point out how difficult China makes it for foreign firms to operate in their local market. Per James Galbraith:
" ... none of the world's most successful trading regions, including Japan, Korea, Taiwan, and now mainland China, reached their current status by adopting neoliberal trading rules." - https://en.wikipedia.org/wiki/Comparative_advantage#Criticis...
The smart idea is to adopt neo-liberal free trade AFTER you have made sure your local business people can stand the competition.
And how can that be done?
Sometimes you simply can't compete with another country with really devalued currency and very low wages
Sometimes you simply can't compete with another country with really devalued currency and very low wages
The book I recommend at the top gets into that in parts two and three. For example, "export discipline"
what? that's the time to sell labor. that's how China started. since the farms were industrializing, there was a lot of people who had "nothing to do", hence Foxconn and so on.
and you know, sweatshops. people opted to work in one because it was better than trying to make it in whatever rural village farming rice and hope.
the problem is not the economics, but the politics. the elites who got filthy rich on this don't want to move to the next stage.
and you know, sweatshops. people opted to work in one because it was better than trying to make it in whatever rural village farming rice and hope.
the problem is not the economics, but the politics. the elites who got filthy rich on this don't want to move to the next stage.
That’s exactly what Japan, Singapore and the rest of Asia did. It worked.
The same way oil-scarce regions don't compete against oil-rich ones. Geography is destiny, and nations specialize in industry for a reason, beyond the universals (food, education, justice and social welfare).
Yep. The US did the exact same thing. Protecting local industry with trade barriers until they were ready to compete internationally. Countries that freely open their borders gets crushed by international corporations.
The well-known problem with "state meddling to support local industries" is that, as a rule, that kind of policy tends to support the most parasitic and least socially beneficial industry sectors (because they don't have much of an alternative to lobbying for more government meddling), not those with the best potential for success.
Exactly, the successful Asian nations had very clever techniques for this. One, was to provide subsidy/tax breaks/trade protections only to those firms that could compete on the global market. This means that firms have to find success through actual productivity and output, rather than through rent seeking.
So it isn't so much "as a rule" as "as a rule when the government has been refulatorily captured."
In fact I think you will find that most industries that are built only happen through lots of government "interference." Silicon Valley is an excellent example of this, as the early customers were all defense industry largesse. And without those extremely rich customers with very extreme technological needs, development of Silicon Valley would have stalled, or perhaps not happened at all.
So it isn't so much "as a rule" as "as a rule when the government has been refulatorily captured."
In fact I think you will find that most industries that are built only happen through lots of government "interference." Silicon Valley is an excellent example of this, as the early customers were all defense industry largesse. And without those extremely rich customers with very extreme technological needs, development of Silicon Valley would have stalled, or perhaps not happened at all.
The government is always "captured" by some interests. The meaningful question is what could incent governments to pick the most widely beneficial policies. Trade policy is one of those sectors where it seems especially easy to make socially bad choices, so being extra careful can make sense.
Most successful US industries from defence to medical science to the internet was fully bootstrap funded by the US government. The same goes for the most successful industries in other countries. Without governmental “meddling” rich countries would not be rich.
I'm not sure I buy your logic (why would a less beneficial industry be better at lobbying?), but even so, is it a worse problem than economic colonialism, where no local owned firms can flourish, because the market is saturated by foreign goods by more advanced firms, and the only economic opportunities are working for those firms?
The examples of those successful Asian countries implies that the tradeoff is well worth it.
The examples of those successful Asian countries implies that the tradeoff is well worth it.
What people who are against immigration, especially "economic" migration don't understand that the companies that provide goods in the migrants origin country are in the destination country. If you are in El Salvador and you are buying American trucks, those trucks are manufactured in the US,if you have nothing to export in El Salvador, you have to go where the employer is and that means migration. It is especially absurd in Germany because exporting and never importing means a constant outflow of funds out of e.g. Greece which also means a constant flow of immigrants to Germany.
I don't understand. Do you mean Americans are immigrating to China, given the trade imbalance?
Why does exporting come with the expectation of providing employment to countries who could not build competent industries. I am not anti-immigration, I am an immigrant myself, just trying to understand your argument.
I think economic immigration has nothing to do with trade imbalance, and all to do with quality of life. As an example, India may be exporting more to Greece, but there are many Indians who would rather live in Greece, and none in the other direction.
Why does exporting come with the expectation of providing employment to countries who could not build competent industries. I am not anti-immigration, I am an immigrant myself, just trying to understand your argument.
I think economic immigration has nothing to do with trade imbalance, and all to do with quality of life. As an example, India may be exporting more to Greece, but there are many Indians who would rather live in Greece, and none in the other direction.
> The examples of those successful Asian countries implies that the tradeoff is well worth it.
And the examples of many, many countries which used "industrial policy" to implement awful ideas like import substitution (i.e. "developing" towards autarchy, not increased trade openness and market discipline) can imply the opposite.
And the examples of many, many countries which used "industrial policy" to implement awful ideas like import substitution (i.e. "developing" towards autarchy, not increased trade openness and market discipline) can imply the opposite.
Of course the state meddling can be done wrong. But unrestricted free trade advocates claim that is cannot be done right - that simply opening up markets is always preferable. That there are zero examples of poor countries that became successful economies following this path, and numerous examples of various forms of protectionism resulting in prosperity, should be a clue to which strategy is better.
> But unrestricted free trade advocates claim that is cannot be done right
I'm not sure that this is correct, the theoretical argument for supporting infant industries is quite old and well known by now. The main remaining question is an empirical one, of whether you think that industrial policy as it's actually practiced in the real world is generally worthwhile. Those who advocate against government meddling argue that it mostly isn't.
I'm not sure that this is correct, the theoretical argument for supporting infant industries is quite old and well known by now. The main remaining question is an empirical one, of whether you think that industrial policy as it's actually practiced in the real world is generally worthwhile. Those who advocate against government meddling argue that it mostly isn't.
Saying this while China has adopted a posture of letting the state control which industries to grow before opening it up to competition, soon becoming the wealthiest country in the world kind of reveals your bias for known-to-not-work solutions.
Japan had foreign currency quota and ownership limits just like China does today. "MITI'S SUCCESSES AND FAILURES IN CONTROLLING JAPAN'S TECHNOLOGY IMPORTS" https://www.jstor.org/stable/43294946
Frontline: Coming From Japan [The Fall Of The US Television Industry] (1992) https://www.youtube.com/watch?v=aesJTsZqm6c
https://www.washingtonpost.com/archive/opinions/1990/09/30/j...
"JAPAN AND THE BIG SQUEEZE September 30, 1990. HOW DID Japan destroy the American television industry? The secret history of that strategy reveals how Japanese manufacturers and the Japanese government first created an anti-competitive cartel ..."
"Japan's raid on the American market dates back to 1956, when the largest Japanese manufacturers formed the Home Electronic Appliance Market Stabilization Council, an illegal production cartel. The intent of the cartel was to monopolize the domestic market for television receivers, radios and other home electric products and to exclude foreign imports. Once their home market was secure, they would launch a drive against the far richer American market."
https://www.chicagotribune.com/news/ct-xpm-1987-04-23-870131...
"TARIFFS WON`T AFFECT MOST JAPANESE TV SETS Apr 23, 1987 The new tariffs on Japanese color televisions will have little or no effect on the U.S. market, because most sets are exempt."
Frontline: Coming From Japan [The Fall Of The US Television Industry] (1992) https://www.youtube.com/watch?v=aesJTsZqm6c
https://www.washingtonpost.com/archive/opinions/1990/09/30/j...
"JAPAN AND THE BIG SQUEEZE September 30, 1990. HOW DID Japan destroy the American television industry? The secret history of that strategy reveals how Japanese manufacturers and the Japanese government first created an anti-competitive cartel ..."
"Japan's raid on the American market dates back to 1956, when the largest Japanese manufacturers formed the Home Electronic Appliance Market Stabilization Council, an illegal production cartel. The intent of the cartel was to monopolize the domestic market for television receivers, radios and other home electric products and to exclude foreign imports. Once their home market was secure, they would launch a drive against the far richer American market."
https://www.chicagotribune.com/news/ct-xpm-1987-04-23-870131...
"TARIFFS WON`T AFFECT MOST JAPANESE TV SETS Apr 23, 1987 The new tariffs on Japanese color televisions will have little or no effect on the U.S. market, because most sets are exempt."
I see it differently. They didn't go all-in on neoliberal trading rules from day one, and that was probably largely sensible, but the end objective should be and basically still is transitioning to neoliberal trading systems.
I'm no absolutist, each country has to balance a whole host of local conditions and needs. They also need to build a consensus. However the fact is they liberalised trade and investment, and that's what brought success. There were preconditions to being able to do that, but it's still a fact.
I'm no absolutist, each country has to balance a whole host of local conditions and needs. They also need to build a consensus. However the fact is they liberalised trade and investment, and that's what brought success. There were preconditions to being able to do that, but it's still a fact.
I would argue that they only liberalized international trade and investment after they attained success, i.e. their local industries became mature enough to compete internationally.
But I suspect we agree - different trade policies are needed for different stages of development. Fledgling industries need protection, while mature industries want to expand into foreign markets.
Where conflict arises is when mature industries want to expand into developing markets, crushing any local competition. Sometimes this is mutually beneficial (not every country can have leading edge semiconductor fabs), other times it is not (nobody needs McDonald's to feed their country), but those industries will still lobby for trade deals for market access, and use neoliberal trade theory to justify it as mutually beneficial.
But I suspect we agree - different trade policies are needed for different stages of development. Fledgling industries need protection, while mature industries want to expand into foreign markets.
Where conflict arises is when mature industries want to expand into developing markets, crushing any local competition. Sometimes this is mutually beneficial (not every country can have leading edge semiconductor fabs), other times it is not (nobody needs McDonald's to feed their country), but those industries will still lobby for trade deals for market access, and use neoliberal trade theory to justify it as mutually beneficial.
I'm not sure McDonald's is worst possible option. As long as it is allowed to operate with local franchises and production. Maybe some part of supply chain can be imported, but mostly it should be locally produced. Thus allow some rent seeking, but also build up local economy.
I don't think that's true, because industrialising takes capital, a lot of it. If all these countries tried developing using indigenous rural sources of capital it would take generations. But foreigners aren't going to invest capital if they don't get rights and guarantees, and that means at least some level of liberalisation.
>>The other, despite the article's unqualified praise of "open up your economy to foreign investment and trade", is trade restrictions and various forms of state meddling to support local industries
A couple counter-arguments to that:
According to Milton Friedman, after Japan was forced by Western powers to remove trade restrictions and drastically lower tariffs in the late 1800s, it prospered, contrary to what the mercantilist theories of the time predicted:
https://youtu.be/CWgNe8v6KFc?t=322
Also, there is much evidence dispelling the mythologized account of MITI's role in the expansion of the Japanese economy specifically:
https://www.econlib.org/library/Enc1/JapanandtheMythofMITI.h...
The article notes much more foundational properties of the 50s/60s Japanese economy, like a smaller portion of private sector output being taxed to support the public sector, as more likely causes of its growth:
>>"The fact that the tax burden is unusually low by the standards of other developed countries may alone be a significant factor in the explanation of the high rate of private saving and investment in Japan." From 1951 to 1970, while Japan's real GNP was growing at an average of 9 percent per year, total national and local taxes (excluding social security) fell from 22.4 percent of national income to 18.9 percent. This left more money for people to save and invest. Compare Japan's situation with the United States, where the proportion rose from 28.5 percent to 31.3 percent. Interestingly, Japan's two decades of greatest postwar growth were also its decades of lowest taxes. During the seventies, as Japan's taxes rose to 22.8 percent of national income in 1980, real GNP growth declined to only 4.8 percent. Higher taxes weren't the only reason for this deteriorating performance, of course; oil price increases also contributed.
This graph demonstrates how much lower social welfare spending used to be in Japan:
https://ourworldindata.org/grapher/social-spending-oecd-long...
A couple counter-arguments to that:
According to Milton Friedman, after Japan was forced by Western powers to remove trade restrictions and drastically lower tariffs in the late 1800s, it prospered, contrary to what the mercantilist theories of the time predicted:
https://youtu.be/CWgNe8v6KFc?t=322
Also, there is much evidence dispelling the mythologized account of MITI's role in the expansion of the Japanese economy specifically:
https://www.econlib.org/library/Enc1/JapanandtheMythofMITI.h...
The article notes much more foundational properties of the 50s/60s Japanese economy, like a smaller portion of private sector output being taxed to support the public sector, as more likely causes of its growth:
>>"The fact that the tax burden is unusually low by the standards of other developed countries may alone be a significant factor in the explanation of the high rate of private saving and investment in Japan." From 1951 to 1970, while Japan's real GNP was growing at an average of 9 percent per year, total national and local taxes (excluding social security) fell from 22.4 percent of national income to 18.9 percent. This left more money for people to save and invest. Compare Japan's situation with the United States, where the proportion rose from 28.5 percent to 31.3 percent. Interestingly, Japan's two decades of greatest postwar growth were also its decades of lowest taxes. During the seventies, as Japan's taxes rose to 22.8 percent of national income in 1980, real GNP growth declined to only 4.8 percent. Higher taxes weren't the only reason for this deteriorating performance, of course; oil price increases also contributed.
This graph demonstrates how much lower social welfare spending used to be in Japan:
https://ourworldindata.org/grapher/social-spending-oecd-long...
> "none of [...] reached their current status by adopting neoliberal trading rules"
and? what's the counterfactual? what would have happened otherwise?
trading is important, but politics is the critical factor. trading provides the inflow of wealth, if it gets allocated in a way that inequality just keeps rising, then the beneficiaries will eventually capture the state and then revert/regress to whatever anti-competitive shit they will think of to enrich themselves.
the problem with neoliberal policies is that they are not enforced, and what we got on a global scale is libertarian idgaf-ism. WTO members should have loudly levied serious tariffs on China (and others) who don't reciprocate the various policies required for doing business as foreigners.
and? what's the counterfactual? what would have happened otherwise?
trading is important, but politics is the critical factor. trading provides the inflow of wealth, if it gets allocated in a way that inequality just keeps rising, then the beneficiaries will eventually capture the state and then revert/regress to whatever anti-competitive shit they will think of to enrich themselves.
the problem with neoliberal policies is that they are not enforced, and what we got on a global scale is libertarian idgaf-ism. WTO members should have loudly levied serious tariffs on China (and others) who don't reciprocate the various policies required for doing business as foreigners.
Another reason for China, Japan and Korea has got to be the intense focus on education, and the belief that education has (financial) value.
Singapore showcases this very well. The ethnic Chinese and the Indians are very much focused on pursuing education for their children, even back in the early colonial days and that has led to great success for that portion of the population. The Malays however, have a more idyllic bent in their cultural preferences and that has led to a more impoverished life overall in their population.
Maybe it’s because the early Chinese and Indians were imported by the British and brought with them the stereotypical immigrant work ethic while the Malays were indigenous and didn’t have the same kind of drive.
Singapore showcases this very well. The ethnic Chinese and the Indians are very much focused on pursuing education for their children, even back in the early colonial days and that has led to great success for that portion of the population. The Malays however, have a more idyllic bent in their cultural preferences and that has led to a more impoverished life overall in their population.
Maybe it’s because the early Chinese and Indians were imported by the British and brought with them the stereotypical immigrant work ethic while the Malays were indigenous and didn’t have the same kind of drive.
Well Tunisia has been focused on education as well and that hasn't led them anywhere.
Without a solid economy you just end up with like 30% unemployment rate where a large percentage of those unemployed hold higher degrees (masters and PhDs).
Without a solid economy you just end up with like 30% unemployment rate where a large percentage of those unemployed hold higher degrees (masters and PhDs).
Huh, I disagree. As someone from Tunisia, the early focus on education has led a considerable number of people to become wealthy (me included). I still remember the days (early childhood) where I was helping my father farming and selling food on the street. That life is quite different from where I am today. I attribute this to the solid education I had early on and the particular culture where I grew up (mid-coast).
I don't think education alone is enough for the path to richness in a nation. Tunisia is still stuck with an inability to re-innovate and free its economy, and resolve its corruption issues. I don't think centralized government is the answer either (neither is industry as some comments suggested; Tunisia could have jumped directly from an agricultural to an information economy, but so many things went wrong).
Maybe it's the Mediterranean? There is hardly any Mediterranean country that had economic success in that same time-frame.
I don't think education alone is enough for the path to richness in a nation. Tunisia is still stuck with an inability to re-innovate and free its economy, and resolve its corruption issues. I don't think centralized government is the answer either (neither is industry as some comments suggested; Tunisia could have jumped directly from an agricultural to an information economy, but so many things went wrong).
Maybe it's the Mediterranean? There is hardly any Mediterranean country that had economic success in that same time-frame.
One big difference between Asian nations such as Korea or Japan and Tunisia is simple: the prevalence of corruption. Corruption is everywhere and has been normalized for centuries in North African cultures (Baksheesh).
> you just end up with like 30% unemployment rate where a large percentage of those unemployed hold higher degrees (masters and PhDs).
The other question is how valuable really are these degrees? I don't recall Tunisian universities being particularly sought after.
> you just end up with like 30% unemployment rate where a large percentage of those unemployed hold higher degrees (masters and PhDs).
The other question is how valuable really are these degrees? I don't recall Tunisian universities being particularly sought after.
Tunisia's natural resources and trade position on the global stage is not very clear and also matters because countries that also focus upon education that have whatever natural resources also include Iceland where many people emigrate from and it's a big local issue there. I'm certainly ignorant to Tunisia' problems nor strengths and am interested in understanding how to best tap into educated persons wherever they are in the world given they're such a valuable resource regardless of country of origin. Countries like Korea and Japan have partly benefited from the West's fears of communism with extra resources and diplomatic attention to serve as a set of buffer countries against the USSR while it didn't do as well in former Soviet countries for reasons I have zero understanding of. To deny that the US and NATO countries have tried to manipulate these buffer countries is pretty much a denial of reality BTW and something worth analyzing compared to other countries with similar socioeconomic conditions during the Cold War period.
In my opinion, Tunisia's problem is cultural. I see the recent mass-immigration of sub-Saharan as potentially significant to let Tunisia lose its culture and identity; and finally break from it toward a liberalized economy and order.
Language, network effects and political affiliations allow for slightly easier visa access beneficial for Asians to work across Middle East, EU, USA.
Language: Tunisians speak fluent French.
Network effects: Tunisia is quite close to Europe.
Visa Access: It's limited but still https://en.wikipedia.org/wiki/Tunisian_diaspora vs https://en.wikipedia.org/wiki/Overseas_Chinese. Relative to population size, Tunisians moved more overseas.
Network effects: Tunisia is quite close to Europe.
Visa Access: It's limited but still https://en.wikipedia.org/wiki/Tunisian_diaspora vs https://en.wikipedia.org/wiki/Overseas_Chinese. Relative to population size, Tunisians moved more overseas.
AS you know even in Western Europe, talented devs/students lose out - sadly -as English is paramount.
Geographically close to Europe but I bet Europeans/Americans do not feel that way. Again due to various factors.
VISA: For Asians there is one advantage - they have some established characteristics - like hardworking, reputation in IT etc. Again not to say others do not have it but when people talk about IT guy/girl they refer to Indians or Asians - NOT Tunisians.
Geographically close to Europe but I bet Europeans/Americans do not feel that way. Again due to various factors.
VISA: For Asians there is one advantage - they have some established characteristics - like hardworking, reputation in IT etc. Again not to say others do not have it but when people talk about IT guy/girl they refer to Indians or Asians - NOT Tunisians.
Really interesting perspective here, wanted to add. I am an engineer now, but studied developmental economics very briefly and there are lot of really interesting theories out there.
This “land distribution” point reminds me of a paper they claimed Spain fell behind other colonial powers like England and France because the resource they exploited was precious metals that allowed a few to get rich, but didn’t allow a middle class to grow.
Make me think of whether big tech does the same thing (if they can find a way to automate enough they can hire few people and few engineers)
This “land distribution” point reminds me of a paper they claimed Spain fell behind other colonial powers like England and France because the resource they exploited was precious metals that allowed a few to get rich, but didn’t allow a middle class to grow.
Make me think of whether big tech does the same thing (if they can find a way to automate enough they can hire few people and few engineers)
I’ve thought a lot about this as big tech has grown over the past twenty years. I don’t think it’s quite as bad as precious metals because tech does have utility. But the low marginal costs and rapid global distribution trend towards winner-take-all results.
But it's also creating a large population of upper middle class/upper class individuals who will then invest their capital. So I still don't see it being as bad as a gold rush.
But the inverse of that is a bit ridiculous: don’t automate the things so you can create busy work for more people. It sounds even more ridiculous if you phrase it as make and keep people alive just to do busy (fake) work.
The point was, at such a developmental stage, large portion of population wouldn't be capable of automating stuff, so keeping people busy and alive would be better than starve them with nothing to do.
That's exactly how and why progress is halted. People yell "think of the jobs" and prevent new advances in automation or technology that would actually save lives or better lives, just for the sake of protecting the incumbent industries.
Right, p -> q does not imply q -> p, and does not imply !p -> !q,yet too often when it comes to economics, that sort of fallacy underlies key arguments on selling policy to the populace.
I couldn't agree with you more. I don't think this principle ceases to be true once a country gets rich, either--the more fundamental goods the people produce themselves with a focus on maximizing output (food, weapons, textiles, fuel, medicines) the better off the country will be, especially if the people own the land they work on.
In many western countries each of these industries has undergone massive monopolization, which in my opinion has driven not only wealth inequality but knowledge inequality--there are now many millions of people who couldn't actually set "the system" up if the oversight vanished because they don't have any real ownership of its components.
In many western countries each of these industries has undergone massive monopolization, which in my opinion has driven not only wealth inequality but knowledge inequality--there are now many millions of people who couldn't actually set "the system" up if the oversight vanished because they don't have any real ownership of its components.
Here’s a good account of how land reform was undertaken in Taiwan:
Taiwan and the "Land to the Tiller" Program by John C. Médaille
https://cooperative-individualism.org/medaille-john_taiwan-a...
Taiwan and the "Land to the Tiller" Program by John C. Médaille
https://cooperative-individualism.org/medaille-john_taiwan-a...
How Asia Works was reviewed on SSC as part of an ongoing review contest: https://astralcodexten.substack.com/p/book-review-how-asia-w...
India has a lot of farmers running their own plot of land, but they aren't very high on the list of agriculturally efficient farming. The average farmer is only doing 1.2 hectares where in the USA the average farm size is hundreds of times greater and far more efficient.
I think it would be economically better, though politically impossible, if India experienced a great deal of farmland consolidation. How is a guy that only farms 1.2 hectares supposed to increase his income? Buy a farm truck or tractor? Increase efficiency? He's stuck doing everything by hand and making $1000 a year.
I think it would be economically better, though politically impossible, if India experienced a great deal of farmland consolidation. How is a guy that only farms 1.2 hectares supposed to increase his income? Buy a farm truck or tractor? Increase efficiency? He's stuck doing everything by hand and making $1000 a year.
> The average farmer is only doing 1.2 hectares where in the USA the average farm size is hundreds of times greater and far more efficient.
Sure, there might be some truth to the statement that an average US farmer is more efficient than an Indian farmer. But, the reason that an average India farmer is only doing 1.2 hectares compared to the US farmers is not that Indian farmers are inefficient at farming, it's just that there are at least two orders of magnitude more farmers in India (and that's their livelihood) compared to the US.
edit:formatting
Sure, there might be some truth to the statement that an average US farmer is more efficient than an Indian farmer. But, the reason that an average India farmer is only doing 1.2 hectares compared to the US farmers is not that Indian farmers are inefficient at farming, it's just that there are at least two orders of magnitude more farmers in India (and that's their livelihood) compared to the US.
edit:formatting
One of the reasons for small land holdings in India are succession laws in Independent India. The entire holding doesn’t go to the eldest male/child, rather it’s often divided among siblings. The division leads to all kinds of violence and shrinking holdings over generations.
Also the most profitable farms aren’t the largest ones, which are often dedicated to growing common grain like wheat and rice, and sugarcane. These crops would be bought by the government at prefixed prices. And the assured income again leads to a lot of fighting and influence mongering, and ironically much smaller takes for the average competing farmer.
Quite unexpectedly, the highest profits are made by farmers who manage to get smart financing and grow niche crops like fruits, some vegetables, flowers, organic, cash crops etc. The highes profits in India are always made by people who carefully avoid government and activist attention, assistance, benevolence, interference.
Also the most profitable farms aren’t the largest ones, which are often dedicated to growing common grain like wheat and rice, and sugarcane. These crops would be bought by the government at prefixed prices. And the assured income again leads to a lot of fighting and influence mongering, and ironically much smaller takes for the average competing farmer.
Quite unexpectedly, the highest profits are made by farmers who manage to get smart financing and grow niche crops like fruits, some vegetables, flowers, organic, cash crops etc. The highes profits in India are always made by people who carefully avoid government and activist attention, assistance, benevolence, interference.
There used to be a lot more american farmers too before farmland consolidation.
Sure, but that only happened because the US had enough capital to put to work all the farmers gainfully.
A lot of small farms are fallback insurance for families. That is, someone in the family works in the city, sends some money back home so a less employable cousin stays on the family farm so that just in case he gets laid off he has somewhere to go + he has somewhere to retire to.
High farm output from land distribution is only the start, and only works for the first decade or so of development. The books later parts describe what works for industrial development, and to some degree what does not. I think India fits in very well with the ideas portrayed in How Asia Works.
The biggest impediment to growth is idle wealth. Wealth tied up in art is not doing anything and should be taxed arbitrarily high at inheritance. The same with slumlords' properties. Taxes on productive income can then be reduced by the same amount to encourage growth.
> Wealth tied up in art is not doing anything
Wealth* that is not doing anything has no effect on the economy. Suppose I had $100 trillion in cash (or art, or other useless commodity) in a vault somewhere, and never spend a dime of it. How is it impeding the economy? If I didn't tell you about it, you wouldn't even know it existed.
It's only when I start spending it, to redirect labor per my wishes, that I start affecting the economy. If I spend it all on yachts, that will cause a lot of labor and materials to go to yachts that won't contribute anything to the economy once built, instead of going to something more productive.
*Using "wealth" to mean fiat money, or art, or anything that has no productive use. E.g. if the wealth was instead in the form of idle farmland, that would be used to grow food if owned by someone else, then yes, that would be impeding the economy. So one must distinguish between wealth with inherent value, and wealth that only has value because people are willing to pay for it.
Wealth* that is not doing anything has no effect on the economy. Suppose I had $100 trillion in cash (or art, or other useless commodity) in a vault somewhere, and never spend a dime of it. How is it impeding the economy? If I didn't tell you about it, you wouldn't even know it existed.
It's only when I start spending it, to redirect labor per my wishes, that I start affecting the economy. If I spend it all on yachts, that will cause a lot of labor and materials to go to yachts that won't contribute anything to the economy once built, instead of going to something more productive.
*Using "wealth" to mean fiat money, or art, or anything that has no productive use. E.g. if the wealth was instead in the form of idle farmland, that would be used to grow food if owned by someone else, then yes, that would be impeding the economy. So one must distinguish between wealth with inherent value, and wealth that only has value because people are willing to pay for it.
>If I spend it all on yachts, that will cause a lot of labor and materials to go to yachts that won't contribute anything to the economy once built, instead of going to something more productivity
Actually that would result in a manufacturing industry. The problem is that if you wanted to buy a Yacht in say south Africa you wouldn't manufacture it in South Africa despite the mass unemployment problem.
Actually that would result in a manufacturing industry. The problem is that if you wanted to buy a Yacht in say south Africa you wouldn't manufacture it in South Africa despite the mass unemployment problem.
> If I didn't tell you about it, you wouldn't even know it existed
but it does exist and is "missing" from the economy (i.e. other peoples pockets)
but it does exist and is "missing" from the economy (i.e. other peoples pockets)
If you add a zero to the end of every bill in circulation, there will be 10x more money, but people won't be any better off.
Not really. There is not some fixed amount of money in existence and certainly not some fixed amount of wealth. Governments and banks create money as necessary to facilitate the actual economy in producing actual stuff, and as for wealth, well... When the price that some artist's works trade at goes up, such that the value of the ones sitting in some billionaire's vault is now higher, that extra wealth clearly doesn't come from anywhere at all. It simply springs into existence from nowhere, and will spring out of existence just as easily if private ownership of art becomes effectively impossible. What is a limiting factor in the real economy's ability to make people better off is its capacity to produce actual goods and services for them to buy, and that capacity is not used in any way by wealth sitting around doing nothing.
>There is not some fixed amount of money in existence
No, but people constantly shout "money printing" when the money supply goes up even though it could be as a result of people producing more physical capital.
Imagine producing more physical capital and being told you don't deserve liquidity in proportion to the capital/value you produced. That is the problem with a fixed supply currency system like the gold standard.
Why is it a problem to keep the money supply fixed? Imagine a theoretical economy where 100% of the money is in the hand of a single person. Even though the rest of the economy is able to produce and barter, it would be far more efficient to use liquidity i.e money to facilitate the division of labor. That one guy with all the money is effectively blocking the public infrastructure we call money. Transactions that ought to happen don't happen. Money doesn't fulfill its function as a medium of exchange. Therefore it is only appropriate to tax people in proportion to the damage they cause to the economy by excessive patience and holding excessive amounts of liquidity. It like an illegal parking fee intended to keep the streets free.
No, but people constantly shout "money printing" when the money supply goes up even though it could be as a result of people producing more physical capital.
Imagine producing more physical capital and being told you don't deserve liquidity in proportion to the capital/value you produced. That is the problem with a fixed supply currency system like the gold standard.
Why is it a problem to keep the money supply fixed? Imagine a theoretical economy where 100% of the money is in the hand of a single person. Even though the rest of the economy is able to produce and barter, it would be far more efficient to use liquidity i.e money to facilitate the division of labor. That one guy with all the money is effectively blocking the public infrastructure we call money. Transactions that ought to happen don't happen. Money doesn't fulfill its function as a medium of exchange. Therefore it is only appropriate to tax people in proportion to the damage they cause to the economy by excessive patience and holding excessive amounts of liquidity. It like an illegal parking fee intended to keep the streets free.
The thing is that during the last two years, governments have systematically shut down the actual productive parts of the economy that make stuff to fight Covid and tried to fill in the gap produced by printing and handing out money instead. This does not work.
I'm not sure I agree with this. There's two key parts to wealth: producing enough stuff to make life easy for people, and distributing that to many many people tether than hoarding it for a few.
The amount of production is not impacted much by how how many bushels of wheat, or days of labor of the average worker, we value the Mona Lisa. Art can be wealth, but not all wealth is a factor of production. Labor, land, capital are all factors of production that influence how much stuff is made.
Making sure that everybody has enough to survive, enough to thrive, and enough to be creative and innovate or achieve what they want should be the goal. Distribution not only of wealth, but perhaps as importantly, distribution of responsibility and authority so that people can make the best possible decisions for themselves. Redistributing away from the accumulation of power/wealth into too few hands is very important for that.
The amount of production is not impacted much by how how many bushels of wheat, or days of labor of the average worker, we value the Mona Lisa. Art can be wealth, but not all wealth is a factor of production. Labor, land, capital are all factors of production that influence how much stuff is made.
Making sure that everybody has enough to survive, enough to thrive, and enough to be creative and innovate or achieve what they want should be the goal. Distribution not only of wealth, but perhaps as importantly, distribution of responsibility and authority so that people can make the best possible decisions for themselves. Redistributing away from the accumulation of power/wealth into too few hands is very important for that.
I really need you to explain to me what "tied up" means. If I buy a $100 million dollar piece of art, that $100m doesn't disappear into the ether, it goes to the person who sold me the piece, who can then spend that on whatever they want.
Can you cite anything to back your claim here? Why is idle wealth more of an impediment than policies that discourage investment? What does idle wealth even mean, how do you measure it? Why would anyone with wealth want it to sit idle?
An no matter how many times you sell the Mona Lisa to pay the Mona Lisa tax, it still wouldn’t drop in value. So all art would have to be owned by the government or non-profits, which can easily be abused by the rich to hold “their” art tax-free.
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There's a fallacy here. The bottom-line economic effect of having a lot of "wealth tied up in art" is incenting the preservation and/or creation of highly valued art. You can't even meaningfully take that wealth away in the aggregate, because it's pure paper wealth; it's a side effect of how much we happen to value some objects.
Slumlord properties have the same theoretical problem as land, in that concentrated ownership can act as an incentive towards bad management; there's not much economy of scale when it comes to managing rental properties, so policy should incent dispersed ownership instead.
Slumlord properties have the same theoretical problem as land, in that concentrated ownership can act as an incentive towards bad management; there's not much economy of scale when it comes to managing rental properties, so policy should incent dispersed ownership instead.
Not when the price of art never reaches it's creator, and only goes stratospheric through speculation and back-and-forth trades long after his death.
You can't be incentivised to create art when you will never realize that incentive. And unlike music record labels, it's not like you are giving someone else your earnings in exchange for editing and technical help and marketing.
Art was a bad example, though, since it's mostly just used as a tax dodge. The real problem is rent seeking.
You can't be incentivised to create art when you will never realize that incentive. And unlike music record labels, it's not like you are giving someone else your earnings in exchange for editing and technical help and marketing.
Art was a bad example, though, since it's mostly just used as a tax dodge. The real problem is rent seeking.
A in-depth review/summary of the book: https://astralcodexten.substack.com/p/book-review-how-asia-w...
I also recommend this book review - https://astralcodexten.substack.com/p/book-review-how-asia-w...
Brings up the point that some countries with similar land reforms (e.g. Mexico) didn't achieve the same result, but generally casts a favorable view of the book.
Brings up the point that some countries with similar land reforms (e.g. Mexico) didn't achieve the same result, but generally casts a favorable view of the book.
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> Countries like Japan, Taiwan, and South Korea that practiced land reform to wrench land away from idle landlords and distribute it widely, have had this success.
This is an interesting view. how did they avoid being punished for this?
Zimbabwe tried redistributing farms but it turned out horribly for them.
Would be interested In understanding how Zimbabwe attempt was different to these countries.
Here in South Africa land reforms is a politically charged issue. Due to apartheid we have a deeply unequal society, where productive farm land is concentrated in primarily in a few hands. Split along racial lines.
I recall meeting some labourers on a farm here in the western cape. They worked on a farm that had been “claimed” by colonisers who arrived in the 1800’s, and then handed down in families.
Where as this labourer ancestors has been in that area for generations before the colonisers got there.
This is an interesting view. how did they avoid being punished for this?
Zimbabwe tried redistributing farms but it turned out horribly for them.
Would be interested In understanding how Zimbabwe attempt was different to these countries.
Here in South Africa land reforms is a politically charged issue. Due to apartheid we have a deeply unequal society, where productive farm land is concentrated in primarily in a few hands. Split along racial lines.
I recall meeting some labourers on a farm here in the western cape. They worked on a farm that had been “claimed” by colonisers who arrived in the 1800’s, and then handed down in families.
Where as this labourer ancestors has been in that area for generations before the colonisers got there.
>Zimbabwe tried redistributing farms but it turned out horribly for them.
It actually didn't. It tries to buy out land but then noticed that it ran out of money. After that they hired thugs to get white farmers off their farms. They didn't give the new black farmers any method of financing their business which led to failed farms. Finally they gave the land to political allies who don't farm at all.
A simple land value tax would have prevented this nonsense.
It actually didn't. It tries to buy out land but then noticed that it ran out of money. After that they hired thugs to get white farmers off their farms. They didn't give the new black farmers any method of financing their business which led to failed farms. Finally they gave the land to political allies who don't farm at all.
A simple land value tax would have prevented this nonsense.
The Land without accompanying appendages: machinery, know-how, processing, storage, transportation, fertilizers and other inputs including seeds AND RELIABLE WATER .... is actually useless.
Zimbabwe redistributed the land without the necessary infrastucture or know-how to till the land and produce output.
Therein was the whole failure.
Zimbabwe redistributed the land without the necessary infrastucture or know-how to till the land and produce output.
Therein was the whole failure.
> Zimbabwe tried redistributing farms but it turned out horribly for them.
The keyword here is "idle". An "idle" landlord is unproductive and unlikely to riot. What happened in Zimbabwe is a power grab. It's usually the leaders taking a nice pie, and sharing the rest with the (in this case black) poor population. This destroys whatever little wealth the country had.
The keyword here is "idle". An "idle" landlord is unproductive and unlikely to riot. What happened in Zimbabwe is a power grab. It's usually the leaders taking a nice pie, and sharing the rest with the (in this case black) poor population. This destroys whatever little wealth the country had.
>Zimbabwe tried redistributing farms but it turned out horribly for them.
Recent history of Zimbabwe: <http://imgur.com/a/VdQdD>
Recent history of Zimbabwe: <http://imgur.com/a/VdQdD>
This is a really interesting take.
Although more capital, in theory, can just easily be made - if the incentives are not in place - it appears to have the same problems as getting past the agricultural stage.
So it seems like a parallel to me why advanced economies might stagnate.
Although more capital, in theory, can just easily be made - if the incentives are not in place - it appears to have the same problems as getting past the agricultural stage.
So it seems like a parallel to me why advanced economies might stagnate.
This is addressed in later parts of the book, and I really only focused on the first part in my comment.
How to keep capital 1) maximally productive, rather than rent seeking, and 2) keep capital from fleeing, are all about what incentive structures the government sets up. And for every single industrial country, government policy has been key to growing infant industries into functional, independent, adult economies.
At every stage of economic development, the rules seem to change for of which policies enable or maximize economic growth. (I fear the US is starting to flub it now, but they may still save themselves!!)
How to keep capital 1) maximally productive, rather than rent seeking, and 2) keep capital from fleeing, are all about what incentive structures the government sets up. And for every single industrial country, government policy has been key to growing infant industries into functional, independent, adult economies.
At every stage of economic development, the rules seem to change for of which policies enable or maximize economic growth. (I fear the US is starting to flub it now, but they may still save themselves!!)
I really recommend the book How Asia Works by Joe Studwell.
Yes. That's a good book.
It's not "land reform", though. It's agricultural modernization. Farming needed to be mechanized to free up labor for manufacturing. The "Asian tigers" had far too many people tied up inefficiently growing rice. Then they could start exporting.
Most poor countries are past that point now, though. Today's poor countries have too many people in cities. And everybody can't be a net exporter.
Yes. That's a good book.
It's not "land reform", though. It's agricultural modernization. Farming needed to be mechanized to free up labor for manufacturing. The "Asian tigers" had far too many people tied up inefficiently growing rice. Then they could start exporting.
Most poor countries are past that point now, though. Today's poor countries have too many people in cities. And everybody can't be a net exporter.
Really excellent point. Transitioning to a capitalist system is extremely difficult because other economic and political systems almost always have much more extreme imbalances in the distribution of money and power (especially if the situation is bad enough to warrant a large change) and introducing a capitalist system lets those folks simply perpetuate uneven wealth/power distributions and in many cases make things worse. The US got around this problem by having huge amounts of land to give away in the west (after conquering it from the Indians of course), and I think Britain kind of got around this problem by creating a system that let their productive merchant class amass large amounts of wealth and partially displace the inefficient aristocracy. France had a rough go of it and had to have multiple revolutions to clear out their nobles and Germany had to lose a few world wars to level things out a bit.
The wealth inequality in the US is now higher than at the time of the French revolution, so I find this assertion to be highly questionable.
Only by some measures and only with the caveat that the methods used to approximate wealth distribution in pre-revolutionary France are not directly analogous to the methods used to measure it today which makes direct comparisons messy. For example, other measures built around the gini coefficient would suggest that now is more equal than pre-revoluitonary France (with the caveat that those methods are also imprecise and built on calculated assumptions). Secondly, my comment is about wealth+power. Despite his wealth and connections, Bezos doesn't have nearly the political power that the second richest man in pre-revolutionary France wielded.
Is this propaganda? Most developing nations that have reached "first world" status, or close to it, did so via aggressive industrial policy, the thing that the already-wealthy Western world deterred developing nations from embracing for many decades (when they could) in favor of the "free trade" model the Bretton Woods institutions were designed to force on developing nations. This article doesn't even seem to acknowledge industrial policy, and instead harps exclusively on Western perspectives.
Either propaganda or inability to get outside of one's own bubble?
I don't think it was a coincidence that all of the Asian countries had strong central governments with commitments to long-term planning, at the times of their ascension. Even today, they send hordes of students to American engineering universities, as if the aggressive industrial policy never ended. At CMU, there were roughly as many Singaporean, Thai, Taiwanese, and Korean students (i.e. each of them) as there were students from the Midwest, in the engineering program I was in. And they were much much better prepared for the material than 9 out of 10 of the American students. From them, I gathered a picture of societies that had strong policies designed to build out the kind of economy that poor countries would love to have. Liberal, it was not.
I don't think it was a coincidence that all of the Asian countries had strong central governments with commitments to long-term planning, at the times of their ascension. Even today, they send hordes of students to American engineering universities, as if the aggressive industrial policy never ended. At CMU, there were roughly as many Singaporean, Thai, Taiwanese, and Korean students (i.e. each of them) as there were students from the Midwest, in the engineering program I was in. And they were much much better prepared for the material than 9 out of 10 of the American students. From them, I gathered a picture of societies that had strong policies designed to build out the kind of economy that poor countries would love to have. Liberal, it was not.
The article talks about that at the end:
The East Asian development model adds to export oriented manufacturing financial repression and land reform. Financial repression in this context is the state controlling people’s savings and through a combination of law and incentives, increasing the amount that’s invested in domestic manufacturing firms. Key tools of this are capital controls, which prevent capital from leaving the country to get higher returns internationally, political influence over bank lending, and currency devaluation which in addition providing advantages to exports reduces consumption and increases savings.
The East Asian development model adds to export oriented manufacturing financial repression and land reform. Financial repression in this context is the state controlling people’s savings and through a combination of law and incentives, increasing the amount that’s invested in domestic manufacturing firms. Key tools of this are capital controls, which prevent capital from leaving the country to get higher returns internationally, political influence over bank lending, and currency devaluation which in addition providing advantages to exports reduces consumption and increases savings.
What i never understood about it is where the "higher returns internationally" would come from. How can returns in a country where the capital is sorely lacking - and many businesses can be opened and operate in a virtually competition-free environment, are not created for not having money to start up - be lower than in developed nations that already have everything imaginable?
You are right about the lack of competition in the third world. But there are sometimes structural and legal factors that make it harder to make money there; lawsuits, arguments, edge cases, and general agreement on how things should work that the West figured out long ago. You can’t invest lots of money with confidence until these things have stabilized.
The other thing is that the economy is like an ecosystem - the richer it gets, the more nooks and crannies open up that can host thriving systems. That’s how a complex, rich economy can keep growing exponentially. Human needs are not limited - there’s always a way to improve life for someone.
The other thing is that the economy is like an ecosystem - the richer it gets, the more nooks and crannies open up that can host thriving systems. That’s how a complex, rich economy can keep growing exponentially. Human needs are not limited - there’s always a way to improve life for someone.
You have to adjust returns by risk. The risk adjusted return of dollars and euros is much higher than the risk adjusted return in pretty much every African country. It only takes repossession, nationalisation policy or civil unrest and your investment is gone.
Poor institutions. Low trust. Absence of rule of law. Corruption. Enormous cultural mismatches. Atrocious or nonexistent infrastructure. Insane difficulties hiring competent staff. Investing in poor countries is really hard.
higher growth potential. You can double gdp by having people make $2 a day more
There are benefits to colocation. The inputs to your business may already exist and are cheaper in a rich city than in a poor city.
You'll see this where everyday shelf stable goods are more expensive in developing nations than in the usa.
You'll see this where everyday shelf stable goods are more expensive in developing nations than in the usa.
Yes, the US for instance was protectionist, once it had a domestic industry. And, earlier in its industrial development, it also stole IP from England[1]. It seems to be the way things are done. The only thing moderating US protectionism, in those early years, was the large agricultural exporting economy of the South.
The other bit is that over a quarter of the worlds population are currently under US sanctions. With much of the world acting in lockstep so as to stay in the good graces of the US[2].
Looking at what Cuba has accomplished just in its biotech industry while under crippling sanctions (for 60 years) makes me think they could really flourish without the sanctions[3].
My argument is that it is necessary to end sanctions for a county to flourish, but it is not sufficient. For instance, ending sanctions and returning seized funds will not make a country like Afghanistan into a rich country (it may prevent an estimated 1M children from dying of starvation due to US sanctions, though[4]).
[1] https://news.sky.com/story/cyber-is-changing-war-but-its-pea...
[2] https://en.wikipedia.org/wiki/United_States_sanctions
[3] https://www.ineteconomics.org/perspectives/blog/how-cuba-bec...
[4] https://www.ft.com/content/b038dec2-a49d-46d5-b187-3dd7216a2...
The other bit is that over a quarter of the worlds population are currently under US sanctions. With much of the world acting in lockstep so as to stay in the good graces of the US[2].
Looking at what Cuba has accomplished just in its biotech industry while under crippling sanctions (for 60 years) makes me think they could really flourish without the sanctions[3].
My argument is that it is necessary to end sanctions for a county to flourish, but it is not sufficient. For instance, ending sanctions and returning seized funds will not make a country like Afghanistan into a rich country (it may prevent an estimated 1M children from dying of starvation due to US sanctions, though[4]).
[1] https://news.sky.com/story/cyber-is-changing-war-but-its-pea...
[2] https://en.wikipedia.org/wiki/United_States_sanctions
[3] https://www.ineteconomics.org/perspectives/blog/how-cuba-bec...
[4] https://www.ft.com/content/b038dec2-a49d-46d5-b187-3dd7216a2...
Why should it be propaganda?
Your claim that all countries got rich via aggressive industrial policy doesn't make sense to me.
What was this policy in the US? What was this policy in Western Germany after WW II?
Their main strategy was to allow creative destruction, through strong institutions. The most important probably the rule of law.
Your claim that all countries got rich via aggressive industrial policy doesn't make sense to me.
What was this policy in the US? What was this policy in Western Germany after WW II?
Their main strategy was to allow creative destruction, through strong institutions. The most important probably the rule of law.
Sounds like the US used the loose IP protection model we complain about with China:
https://www.wikipedia.org/wiki/Samuel_Slater
> Samuel Slater (June 9, 1768 – April 21, 1835) was an early English-American industrialist known as the "Father of the American Industrial Revolution" (a phrase coined by Andrew Jackson) and the "Father of the American Factory System". In the UK, he was called "Slater the Traitor"[2] and "Sam the Slate" because he brought British textile technology to the United States, modifying it for American use. He stole the textile factory machinery designs as an apprentice to a pioneer in the British industry before migrating to the United States at the age of 21.
https://www.wikipedia.org/wiki/Samuel_Slater
> Samuel Slater (June 9, 1768 – April 21, 1835) was an early English-American industrialist known as the "Father of the American Industrial Revolution" (a phrase coined by Andrew Jackson) and the "Father of the American Factory System". In the UK, he was called "Slater the Traitor"[2] and "Sam the Slate" because he brought British textile technology to the United States, modifying it for American use. He stole the textile factory machinery designs as an apprentice to a pioneer in the British industry before migrating to the United States at the age of 21.
The US in the early 19th century was already a rich country. In fact, the US was a rich country from before it was even a country.
West Germany after WW2 did have strong industrial policy, and up to now it's one of the European states with the strongest industrial policies.
West Germany after WW2 did have strong industrial policy, and up to now it's one of the European states with the strongest industrial policies.
> What was this policy in the US?
See: https://en.wikipedia.org/wiki/American_System_(economic_plan...
See: https://en.wikipedia.org/wiki/American_System_(economic_plan...
"Strong industrial policy" comes in many forms. The onw that conflicts with free trade tend to create low added value, high capital intensive "also run" companies that benefit no one.
High tech industry requires both a policy that allows them and access to the international market, for both buying and selling.
High tech industry requires both a policy that allows them and access to the international market, for both buying and selling.
The article backs its theories up with historical examples. You're attacking it for seemingly not being interested in your pet theory.
Propaganda doesn't mean lies. I can make propaganda saying that the only way to get rich is to have an industry based on the export of wheat, and I can find historical examples of that. Just because you can provide examples doesn't mean your theory is right, and the whole article basically reeks of "woo western good stupid asians not letting their whole economy commit suicide" while ignoring the thousands of factors that go into it. One of the markers for economical success is often lack of involvement of the US. See the Philippines where the US backed Marcos as a dictator, with this sack of shit Reagan granting him asylum after being kicked out of the country.
There's no shortage of historical examples to support his position, and it's not a weird fringe theory.
If you read further, other potential models are mentioned.
I would agree that the "liberalization" theory has been fairly well disproven, and is nearly laughable. But the post is not propaganda, as it mentions competing ideas that IMHO are much better.
I would agree that the "liberalization" theory has been fairly well disproven, and is nearly laughable. But the post is not propaganda, as it mentions competing ideas that IMHO are much better.
The definition of 'getting rich' in this article seems rather vague. Are we talking about the average standard of living of the entire population, or the accumulation of wealth by a handful of privileged elites? A gross measure like GDP doesn't distinguish between the two situations, does it?
The general trend in poor countries with exportable raw materials over the 20th century has been this: wealthy and powerful countries make deals with small groups of elites to extract those resources and ship them to the wealthy countries industrial production sectors at relatively low prices, while propping up the local tinpot dictators with weapons and cash so they can keep control of their populations. Saudi Arabia is one example (America being the wealthy patron), Niger is one example (France's supply of uranium ore), and that's how the Soviet Union operated in the various 'stans of Central Asia as well. The poor countries may have 'become rich' but in general, their average standard of living remains extremely low relative to the industial wealthy powers.
The only way for such countries to raise their overall standard of living is to add value to their raw materials domestically by building up their manufacturing potential. For example, if they have lithium deposits, they should be building factories to convert the lithium into batteries, and then sell the batteries on the global market. Now they have an industrial center, which brings in revenue, and they have begin to have a well-paid professional sector, medical and legal experts, a higher standard of living and so on.
At least until their brilliant financial gurus realize they can increase their personal wealth 50-fold by shipping the entire industrial sector to some Third World hellhole and wrecking the whole system, like Wall Street did to the Rust Belt in the United States.
The general trend in poor countries with exportable raw materials over the 20th century has been this: wealthy and powerful countries make deals with small groups of elites to extract those resources and ship them to the wealthy countries industrial production sectors at relatively low prices, while propping up the local tinpot dictators with weapons and cash so they can keep control of their populations. Saudi Arabia is one example (America being the wealthy patron), Niger is one example (France's supply of uranium ore), and that's how the Soviet Union operated in the various 'stans of Central Asia as well. The poor countries may have 'become rich' but in general, their average standard of living remains extremely low relative to the industial wealthy powers.
The only way for such countries to raise their overall standard of living is to add value to their raw materials domestically by building up their manufacturing potential. For example, if they have lithium deposits, they should be building factories to convert the lithium into batteries, and then sell the batteries on the global market. Now they have an industrial center, which brings in revenue, and they have begin to have a well-paid professional sector, medical and legal experts, a higher standard of living and so on.
At least until their brilliant financial gurus realize they can increase their personal wealth 50-fold by shipping the entire industrial sector to some Third World hellhole and wrecking the whole system, like Wall Street did to the Rust Belt in the United States.
In practice, when GDP rises significantly, average standard of living rises as well. Saudi Arabia's GDP per capita is $20k. Niger's GDP per capita is $565. I think that Niger and Saudi Arabia's living standards are about on par with other countries for those per-capita GDPs.
> Saudi Arabia's GDP per capita is $20k.
Saudi Arabia's nominal GDP per capita. Their GDP (PPP) per capita is more like $50k - comparable to the United Kingdom, which has significantly better living standards.
Saudi Arabia's nominal GDP per capita. Their GDP (PPP) per capita is more like $50k - comparable to the United Kingdom, which has significantly better living standards.
But... the reason why their PPP GDP is much better than their nominal GDP is exactly because they aren't actually that wealthy a nation, and so anything involving human labor there is cheaper. If Saudi Arabia actually developed better (whether by finding new, exciting natural resources to export or by developing some kind of productive economic sector not based on natural resource expansion), their nominal GDP would grow but the difference between their nominal GDP and their PPP GDP would shrink.
The point here is, Saudi Arabia is not particularly wealthy, and that, not their inequality, mostly explains their low standard of living. It is not the case, as the thread-starter implied, that Saudi Arabia has a high GDP but due to massive inequality it's all in the hands of the royal family.
The point here is, Saudi Arabia is not particularly wealthy, and that, not their inequality, mostly explains their low standard of living. It is not the case, as the thread-starter implied, that Saudi Arabia has a high GDP but due to massive inequality it's all in the hands of the royal family.
Also in a very unequal society like SA the average doesn't mean much.
Not bad. But about financial repression is wrong.
Best example is Russia.
They few decades tried to make all things at home, naming it import-substitution ("импортозамещение").
Really they need this because they want to conquer world, and manufacture independence need to withstand sanctions.
And in reality they got extremely criminalized economy, and economy slowdown, because it is much easier to falsify documents, to claim mostly Chinese produced goods, than to really make own production. Same thing practice Ukraine and most other ex-USSR countries, with same result.
Second is that regulations vectored to limit access of imported goods, inhibit economy, because they limit access of business to really need things.
For example, Ukraine have high import taxes for automobiles, to support internal auto producers, but in reality, because of this limitations, we have prices for same machines, few times higher than in neighbor countries, and small business cannot buy automobile and lot of business are not opened at all.
These import barriers are so powerful brakes, that even last years chain of open market agreements with many countries, does not help to grow gdp much, we have grow of potential markets for 1000% in 10 years, but gdp grow less than measurement error.
Korea was poor country before economic liberalization, and before them jailed president :)
To be strict, none of mentioned methods alone could be driver for grow more than for few percents, and to grow faster, need to make them ALL good enough, comparable to developed countries of old democracies.
Best example is Russia.
They few decades tried to make all things at home, naming it import-substitution ("импортозамещение").
Really they need this because they want to conquer world, and manufacture independence need to withstand sanctions.
And in reality they got extremely criminalized economy, and economy slowdown, because it is much easier to falsify documents, to claim mostly Chinese produced goods, than to really make own production. Same thing practice Ukraine and most other ex-USSR countries, with same result.
Second is that regulations vectored to limit access of imported goods, inhibit economy, because they limit access of business to really need things.
For example, Ukraine have high import taxes for automobiles, to support internal auto producers, but in reality, because of this limitations, we have prices for same machines, few times higher than in neighbor countries, and small business cannot buy automobile and lot of business are not opened at all.
These import barriers are so powerful brakes, that even last years chain of open market agreements with many countries, does not help to grow gdp much, we have grow of potential markets for 1000% in 10 years, but gdp grow less than measurement error.
Korea was poor country before economic liberalization, and before them jailed president :)
To be strict, none of mentioned methods alone could be driver for grow more than for few percents, and to grow faster, need to make them ALL good enough, comparable to developed countries of old democracies.
I hate to plug my own writing here, but if you'd like a much deeper exploration of the topic, you'll probably enjoy reading The Full Stack of Society: Can You Make A Whole Society Wealthier?
https://www.conradbastable.com/essays/the-full-stack-of-soci...
A lot of folks on HN have liked and shared it before so I feel like it's okay to share again.
My core thesis is that there's a stack of wealth-building strategies:
- Feudalism, aka "take & tax other people's productivity" (this is zero-sum)
- Mercantilism, aka "sell someone else's productive outputs into someone else's consumption"
- Industrialism, aka "Mercantilism but with production brought in-house"
- Globalism, aka "export Industrialism to make your customers richer so they can buy more of your products"
- Financialism, aka "centralize and allocate flows of capital across time to accelerate any of the other layers in the stack"
In reality, most successful countries combine a couple of these, but one tends to be dominant at a time. Most large countries today have passed through this stack and are currently in one of the final 3 layers.
A handful of small, well-positioned countries are able to run unique strategies based around supporting neighbours. I chose not to focus on these because they tend to be very specific (e.g. Singapore can only be Singapore because it's located in Singapore, Ireland needs to be in the EU for its tax arbitrage to work, etc.).
I would also +1 to epistasis's suggestion in the top comment -- How Asia Works is a great book. If you read it, also read Miti and the Japanese Miracle. My chapter on Industrialism links to those and other related sources.
https://www.conradbastable.com/essays/the-full-stack-of-soci...
A lot of folks on HN have liked and shared it before so I feel like it's okay to share again.
My core thesis is that there's a stack of wealth-building strategies:
- Feudalism, aka "take & tax other people's productivity" (this is zero-sum)
- Mercantilism, aka "sell someone else's productive outputs into someone else's consumption"
- Industrialism, aka "Mercantilism but with production brought in-house"
- Globalism, aka "export Industrialism to make your customers richer so they can buy more of your products"
- Financialism, aka "centralize and allocate flows of capital across time to accelerate any of the other layers in the stack"
In reality, most successful countries combine a couple of these, but one tends to be dominant at a time. Most large countries today have passed through this stack and are currently in one of the final 3 layers.
A handful of small, well-positioned countries are able to run unique strategies based around supporting neighbours. I chose not to focus on these because they tend to be very specific (e.g. Singapore can only be Singapore because it's located in Singapore, Ireland needs to be in the EU for its tax arbitrage to work, etc.).
I would also +1 to epistasis's suggestion in the top comment -- How Asia Works is a great book. If you read it, also read Miti and the Japanese Miracle. My chapter on Industrialism links to those and other related sources.
I like how the internet gives everyone an opportunity to voice their opinion. Unfortunately it means every random person can write something that sound authoritative even though there is no accuracy.
The title is something lots of people are interested in, but then the author has lists sources, no evidence and doesn't even write a profile about who they are.
The title is something lots of people are interested in, but then the author has lists sources, no evidence and doesn't even write a profile about who they are.
You make it sound as if there's something wrong with that?
As you point out, it's obvious none of the claims are supported by evidence, and there is no appeal to authority ("this is who I am"), which qualifies this as an opinion, and should be taken as such.
Which means that any reasonable person should, before they make their own opinion, look for evidence for or contradictions to the posted opinion, and use that to make a more informed opinion.
Now, the fact that a majority of internet readers are not reasonable is where we should be worried, not about someone sharing their opinion in a modern day bar.
(Interestingly, the fact that those same people never thought to critically look at "official" news on TV/newspapers is a symptom of the same problem before the internet.)
As you point out, it's obvious none of the claims are supported by evidence, and there is no appeal to authority ("this is who I am"), which qualifies this as an opinion, and should be taken as such.
Which means that any reasonable person should, before they make their own opinion, look for evidence for or contradictions to the posted opinion, and use that to make a more informed opinion.
Now, the fact that a majority of internet readers are not reasonable is where we should be worried, not about someone sharing their opinion in a modern day bar.
(Interestingly, the fact that those same people never thought to critically look at "official" news on TV/newspapers is a symptom of the same problem before the internet.)
To me, this question has been answered long ago by the book The mystery of Capital (2000) by Hernando de Soto.
The conclusion is, that the administrative and judicial system needs to work for the poor, too; and there needs to be a process that is somewhat practical to go from black/ gray economy to fully legal status.
He and team did historical research how that process was very similar in all countries now rich; and showed by experiment that same process is a rich privilege, or extremely costly and inefficient for everyone else (often due to hesitation to overturn nominal property rights in conflict with factual reality). The experimental study was done in a number of countries in the so called developing world, Egypt, Peru, Malaysia among them iirc, covering quite distinct cultural backgrounds, and consisted in following real life cases (over many years).
The conclusion is, that the administrative and judicial system needs to work for the poor, too; and there needs to be a process that is somewhat practical to go from black/ gray economy to fully legal status.
He and team did historical research how that process was very similar in all countries now rich; and showed by experiment that same process is a rich privilege, or extremely costly and inefficient for everyone else (often due to hesitation to overturn nominal property rights in conflict with factual reality). The experimental study was done in a number of countries in the so called developing world, Egypt, Peru, Malaysia among them iirc, covering quite distinct cultural backgrounds, and consisted in following real life cases (over many years).
Read the same book, along with the much denser "El Otro Sendero" (the other path), which focuses more on Peru alone, and to date I haven't found a better detailed chain of reasoning for why countries get rich and developed across the board, or stay poor, or as in many cases, get wealthier but with enormous discrepancies in who accumulates the wealth and how it's achieved/used.
Unfortunately, it first depends on whether the IMF, really the U.S. and to some extent the EU, are willing to allow it.
This is the only correct answer. Everything else is textbook speculation.
As long as we have modern colonialism and unbalanced currency valuations, the poor will stay poor.
Eg - The irony of mentioning poverty traps, when all Western countries still have massive poor classes that experience them is lost on the author and audience.
As long as we have modern colonialism and unbalanced currency valuations, the poor will stay poor.
Eg - The irony of mentioning poverty traps, when all Western countries still have massive poor classes that experience them is lost on the author and audience.
In the case of China, the answer would be - fight off the Japanese, then fight the US backed KMT, launching speak bitterness rallies against large landlords along the way, pour troops into North Korea in the 1950s, start a great leap forward campaign and then a Cultural Revolution. Then Mao and Zhou Enlai make some peace with the US and we carry on until Xi Jinping where you have the largest gdp-ppp in the world and the second largest nominal gdp in the world. Not in this prescription, and of course Deng Xiaoping aligned the economy to the changing world situation, but it was a different road, and other countries industrialized on this road as well.
Get defeated in war by the us and have them rebuild your country for you. Humorously, the mouse than roared. Seriously, Japan and the Marshall plan.
The also didn’t seem to include “dig something valuable out of the ground and sell it” as an option.
The also didn’t seem to include “dig something valuable out of the ground and sell it” as an option.
I've worked and traveled in many developing countries, and the key seems to be to get to the point where you have a self-perpetuating middle class: there have to be enough people with disposable income that they can start a virtuous cycle where their spending pulls other people out of poverty. And this is most easily (if that's the word) done by creating factory jobs that both pay better than farming and reward the entrepreneurial. This happened in China, in Singapore, in Korea, in Japan, in Thailand, and thanks to the BPO industry it's starting to happen in the Philippines and India as well. Alas, it's manifestly failing to happen in Africa.
As it happens, I'm typing this in a mid-tier Vietnamese city of some fame as a beach resort. Coming out the War of American Aggression (as they call it here), Vietnam had a hardline Communist government and sub-Saharan Africa levels of poverty, with most people earning a dollar a day or less, but in the 1980s they finally started experimenting with capitalism. When I first visited this city in the early 2000s, there were a few hotels, but they catered almost exclusively to adventurous foreigners.
In 2022, the equation has been flipped completely on its head: the beach is packed side to side with highrises that could easily be in Miami or the Gold Coast, and 99% of the visitors here are now locals. This applies even at the top-end places like the Western chain hotel I'm staying at, which is completely booked out, and the expensive seafood restaurants: the one I ate at tonight was doing a roaring trade in imported Alaskan king crabs selling for hundreds of US dollars each. And for every hi-so there's 10 or 100 regular folks on company-sponsored getaways and the like, and behind every domestic tourist there's the local low-cost airline with its air crew and ground staff, the Grab (Uber) driver, the tour guide, the IT guy sorting out the hotel's networking, etc etc.
As it happens, I'm typing this in a mid-tier Vietnamese city of some fame as a beach resort. Coming out the War of American Aggression (as they call it here), Vietnam had a hardline Communist government and sub-Saharan Africa levels of poverty, with most people earning a dollar a day or less, but in the 1980s they finally started experimenting with capitalism. When I first visited this city in the early 2000s, there were a few hotels, but they catered almost exclusively to adventurous foreigners.
In 2022, the equation has been flipped completely on its head: the beach is packed side to side with highrises that could easily be in Miami or the Gold Coast, and 99% of the visitors here are now locals. This applies even at the top-end places like the Western chain hotel I'm staying at, which is completely booked out, and the expensive seafood restaurants: the one I ate at tonight was doing a roaring trade in imported Alaskan king crabs selling for hundreds of US dollars each. And for every hi-so there's 10 or 100 regular folks on company-sponsored getaways and the like, and behind every domestic tourist there's the local low-cost airline with its air crew and ground staff, the Grab (Uber) driver, the tour guide, the IT guy sorting out the hotel's networking, etc etc.
I am not sure how accurate is the first paragraph. There is a strong notion in Confucianist countries that promotes saving majority of your income. People in China, Taiwan, and Singapore often tend to send save 70% of their income. The same can be said about migrants from those nations that moved to the western countries. At the same time, in the US and Western Europe is one decides to save 50% of their income it is considered exceptionally high.
The actual savings rate in Singapore is around 40%, and Confucianist countries also have a strong notion of "face", including conspicuous consumption to keep up appearances. But feel free to visit any Singaporean shopping mall or restaurant: it's locals who are doing the vast majority of the spending.
I've spent years in Taipei and I have definitely observed the phenomenon you're describing. However, from my experience, it's mostly the ultra rich/upper class people that occupy the department stores on weekends.
> There is a strong notion in Confucianist countries that promotes saving majority of your income.
Rather than ancient Chinese philosophy, this mindset was probably more driven by https://en.wikipedia.org/wiki/1997_Asian_financial_crisis
Rather than ancient Chinese philosophy, this mindset was probably more driven by https://en.wikipedia.org/wiki/1997_Asian_financial_crisis
The saving habits was mainly of the post-WW2 generations that have to follow a prudent life style to survive. Highly doubt that Confucius has anything to do with this.
I'm from sub-Saharan Africa and FWIW I agree. The middle class represents a threat to power of the elite which continually tries to disempower it with the help of the jealousy of the "not middle class".
So in countries where the middle class is under constant attack via corrupt use of their taxes, such as my home, economic development cannot really happen. Everyone is living hand to mouth and not able to take risks or invest.
So in countries where the middle class is under constant attack via corrupt use of their taxes, such as my home, economic development cannot really happen. Everyone is living hand to mouth and not able to take risks or invest.
When the economic hitmen come to the country with IMF conditionalities they accept them then trickle down all the money thats leftover. If you really want a nation rich they should nationalize their products but thats usually when its time for "democracy" and you get coup'ed, so for the greater good, just do what the economic hitman says. Unfortunately only the corrupt elite get rich. Maybe they industrialize and create a middle class despite the corruption, which does the most to increase a nations wealth.
IMF is not a develoment fund. It may help you get your balance meet if you already have runaway debt problem. If you don't, it will not come knocking.
We should ask also how do countries get rich amd also stay democratic and free.
Saudi Arabia may be rich but that doesn't mean it's a great place to live
It's questionable whether Saudi Arabia can really be described as "rich". The country has a great deal of income equality (there are beggars on the streets of Riyadh), foreign workers who are paid a pittance do virtually all of the work, and the economy including a huge chunk government make-work for locals is mostly a mirage propped up by oil prices.
That's the problem, people usually talk about a rich country as synonymous to a good quality of life for the average man. And often it isn't
A rich country is a country with money and capital. It doesn't mean that the country is a good place to live
A rich country is a country with money and capital. It doesn't mean that the country is a good place to live
> there are beggars on the streets of Riyadh
I have no idea how rich Saudi Arabia actually is but where are there no beggars?
I have no idea how rich Saudi Arabia actually is but where are there no beggars?
Begging is illegal in Singapore.
A poor to rich country should be measured by how quickly they can build high-speed rail networks and their capacity to turn raw input into finished goods. In addition, rich to poor decline should be measured in how quickly the opposite is occurring in terms of decline or inability to improve public works, education, and manufacturing.
Capital always flows to regions where it's not subjected to high taxation and where it's reasonably safe from political turmoil. And without plenty of capital, the only way developing nations can get rich is by exploiting resources or using forced labour.
East Asia is the only region which was certainly 'poor' but now can be described as somewhat 'rich', and they are all more or less followed the same pattern:
- low wage, high volume, light industry for export - lower wage, high volume, heavy industry - multi-decade protectionism to raise global competitive domestic champions - no democracy, if you can help it to ensure political stability to execute multi-decade strategy
Idiosyncratic caveats:
- Japan got its boost particularly by becoming the arms manufacturer for the US in the Korean War
- Singapore / Hong Kong also had financial liberalisation / international money laundering for the Brits
- Korea / Taiwan / Hong Kong also had shipping
China has followed clearly the same trend (note the irrelevance of the political system, main thing is to avoid democratic instability), simply becoming more massive than any before because it is inherently massive, and has therefore even greater economies of scale to leverage.
- low wage, high volume, light industry for export - lower wage, high volume, heavy industry - multi-decade protectionism to raise global competitive domestic champions - no democracy, if you can help it to ensure political stability to execute multi-decade strategy
Idiosyncratic caveats:
- Japan got its boost particularly by becoming the arms manufacturer for the US in the Korean War
- Singapore / Hong Kong also had financial liberalisation / international money laundering for the Brits
- Korea / Taiwan / Hong Kong also had shipping
China has followed clearly the same trend (note the irrelevance of the political system, main thing is to avoid democratic instability), simply becoming more massive than any before because it is inherently massive, and has therefore even greater economies of scale to leverage.
Brazil tried local protected manufacturing --Mexico tried to be the lower cost manufacturer for NorthAm and SouthAm and they had some success but ultimately were beaten by Chinese labor. China had the advantage of both being a MFG base and also a market opportunity. Their labor force in their EEZs were also better educated.
I have read that Brazil's main problem is geography - major population centres are the coast, and separated from each other by difficult-to-pass terrain. Part of what Bolsonaro is trying to do is solve this, through sacrificing the Amazon
Well, you shoul get better sources.
Brazil does have logistical problems, but your characterization of them is completelly off. And, by the way, the Amazon isn't logistically "on the way" for anything. The parts that aren't in reach from some quite large ports do not host many people or economical activity.
Brazil does have logistical problems, but your characterization of them is completelly off. And, by the way, the Amazon isn't logistically "on the way" for anything. The parts that aren't in reach from some quite large ports do not host many people or economical activity.
indeed I should, I was commenting off-the-cuff, thank you for the admonishment!
This doesn't make any sense, sorry. The Amazon is very, very far away from the Brazilian coast.
I accept my ignorance
China is not a rich country by G7 standards. https://en.wikipedia.org/wiki/G20
Their growth is mainly triggered by rolling back the horrendous policies of the Great Leap Forward.
Their growth is mainly triggered by rolling back the horrendous policies of the Great Leap Forward.
quite right, China continues to consider itself a developing nation, so this is my categorisation. Trajectory is there though
Finland was pretty poor before and after the war, and was burdened by war reparations.
All the rich countries in Europe were once poor.
As an answer to the question: stable, somewhat competent and non corrupt government.
Good luck with that.
As an answer to the question: stable, somewhat competent and non corrupt government.
Good luck with that.
I would be very interested to know of Finland's economic progress. I suspect the end of the Cold War was a delta, though this is just my intuition. Would love to be educated on this!
Finland was part of Sweden until Napoleonic wars. At that time, the Enlightenment was a fashionable topic among European monarchs. Instead of annexing Finland, Alexander I of Russia set it up as an autonomous grand duchy, as a test case for more modern forms of government. Finland gained a political identity and kept Swedish institutions instead of adopting Russian ones.
Economic growth started in the mid 19th century. Industrialization began, the old guild system was abolished, and there were fancy new things such as public education, own currency, and railroads. When Finland gained independence during WW1, it was largely a formality. There was still a bloody civil war, and Finns didn't really start working together until WW2.
When WW2 ended, Finland was still largely rural. There were war reparations to be paid and refugees from lost territories to resettle. While Finland had leaned towards Germany until then, it was no longer possible, and Sweden became the new role model. Finland focused on heavy industry and technology. People started moving to cities (and to Sweden). Because Finland was a special case as the favorite capitalist country of the Soviet block, trade with the USSR became lucrative. The economy was mostly free but not fully open, and the occasional devaluation of the currency was a key financial tool. By the 1980s, Finland had become a wealthy country.
The end of the Cold War was a catastrophe. Trade with the USSR/Russia collapsed. Business leaders didn't know how to operate in an open market. The government didn't know how to deal with that. The result was probably the worst depression in Finnish history. Other political choices of the time (such as joining the EU) were better. The next center-left/center-right coalition made some good choices, as did Nokia. After 2000, Finland started regularly appearing near the top of various "top countries by [a good thing]" lists.
Economic growth started in the mid 19th century. Industrialization began, the old guild system was abolished, and there were fancy new things such as public education, own currency, and railroads. When Finland gained independence during WW1, it was largely a formality. There was still a bloody civil war, and Finns didn't really start working together until WW2.
When WW2 ended, Finland was still largely rural. There were war reparations to be paid and refugees from lost territories to resettle. While Finland had leaned towards Germany until then, it was no longer possible, and Sweden became the new role model. Finland focused on heavy industry and technology. People started moving to cities (and to Sweden). Because Finland was a special case as the favorite capitalist country of the Soviet block, trade with the USSR became lucrative. The economy was mostly free but not fully open, and the occasional devaluation of the currency was a key financial tool. By the 1980s, Finland had become a wealthy country.
The end of the Cold War was a catastrophe. Trade with the USSR/Russia collapsed. Business leaders didn't know how to operate in an open market. The government didn't know how to deal with that. The result was probably the worst depression in Finnish history. Other political choices of the time (such as joining the EU) were better. The next center-left/center-right coalition made some good choices, as did Nokia. After 2000, Finland started regularly appearing near the top of various "top countries by [a good thing]" lists.
That was fascinating. Does anyone have recommendations for something that goes into more detail? Finland seems to have had different enough circumstances that it can be a useful test case for grand theories of economic development based on looking at e.g. Asia.
It's called a developmental state:
https://en.m.wikipedia.org/wiki/Developmental_state
https://en.m.wikipedia.org/wiki/Developmental_state
Well, state of the public infrastructure and transportation is top notch in China nowadays. Traveling from big cities in China to big cities in US is like going to the third world country.
Thus, the "developed" country is a mirage, it only applicable to certain aspects of life or economy, while as a whole doesn't hold.
Some huge number of Chinese (50%?) are still in the countryside scraping by as farmers on a few hundred dollars a month.
East/Central Europe (post commie)?
Exactly, that’s one of the most overlooked parts of the Earth, but if you consider the GDP growth rate over the last 30 years, Poland is second only to China.
I believe there was a long period (decade) of economic depression, entry into the EU then opened up a huge new market for former Warsaw Pact countries. It is worth noting that East / Central Europe economic development remains very uneven - Romania, Bulgaria both pretty much economic basket cases
You are wrong for example Poland GDP per capita growth 6x Czech 3x Hungary 2x before they join EU and after commie ended (90-93) etc etc. https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location...
happy to be corrected, that's for doing so
Germany has helped push development there (as has the US to a lesser degree) by investing in manufacturing and taking advantage of their labor force(s). Modernizing existing factories helped.
Im more about "East Asia is the only region which was certainly 'poor' but now can be described as somewhat 'rich',"
Romania and other parts of south Eastern Europe were quite poor.
Yes thats why im showing post commie east europe as example of countires that was poor and are "rich" today
Malaysia and Thailand are also not poor anymore.
Maybe not "poor" in the literal sense of the word, and certainly much less than they used to be, but also not really fully developed countries comparable to the Western nations.
Define western nations. Looking at the hdi (and experience), I think both countries qualify (of course they dont top it) .
https://en.m.wikipedia.org/wiki/Human_Development_Index
Click saver: on https://en.m.wikipedia.org/wiki/List_of_countries_by_Human_D... has Thailand on 79th place between Peru and Armenia. Malaysia is on place 62 between Costa Rica and Kuwait. The list is 189 entries long so both of these countries are still in the upper half, but there aren't western countries nearby, unless east european countries like Albania and Bulgaria count.
Geography also plays a large part. Hard to progress when you're dependent on bordering countries for access to resources.
A coastline, access to ports and, regular and reliable rainfall, moderate climate with little danger of natural disasters all helps.
A coastline, access to ports and, regular and reliable rainfall, moderate climate with little danger of natural disasters all helps.
By being at the borders of colliding empire vasall-states, were both sides prop up the front-states and use soft-power as much as possible. Follow the iron-curtain lines of the blocks in the cold war to find countries that got rich that way.
TLDR is start with strong authoritarian state capacity and violently bring order to social fabric and build industrial/extractive base while ingratiating powerful hegemons / neighbours, or certainly not piss them off. Ultimately, those with wealth and power get to pick winners and losers. Nascent democracies tend to be developmental death sentences - can't coordinate. It will likely involve extreme state violence.
Less viable Asian Tiger export driven route:
-Be authoritarian.
-Establish domestic serenity via state violence.
-Have maritime access.
-Be geopolitically strategic to US interests at heigh of hegemony.
-Align as satraps and be subsidized by US.
-Create export driven industrial policy to climb up value chain.
-Educate population
Still viable extractive state route.
-Be authoritarian.
-Establish domestic serenity via state violence.
-Have maritime access.
-Have resources.
-Don't be sanctioned by US.
To get to upper income fast:
-Helps to have small population.
-Have access to cheap migrant labour.
Historically, start with:
-Be authoritarian.
-Establish domestic serenity via state violence.
-Have access to cheap slave labour.
Less viable Asian Tiger export driven route:
-Be authoritarian.
-Establish domestic serenity via state violence.
-Have maritime access.
-Be geopolitically strategic to US interests at heigh of hegemony.
-Align as satraps and be subsidized by US.
-Create export driven industrial policy to climb up value chain.
-Educate population
Still viable extractive state route.
-Be authoritarian.
-Establish domestic serenity via state violence.
-Have maritime access.
-Have resources.
-Don't be sanctioned by US.
To get to upper income fast:
-Helps to have small population.
-Have access to cheap migrant labour.
Historically, start with:
-Be authoritarian.
-Establish domestic serenity via state violence.
-Have access to cheap slave labour.
Rather than “be authoritarian”, you could just say “provide stable political environment”, which would include authoritarian.
As feedback - lots of incomplete sentences. I had to stop reading it was driving me nuts
Has there ever been an example of a country becoming rich that didn't involve some sort of systemic oppression and exploitation of some group of people (whether within their own country or in another)?
Can you think of any country, rich or poor, that doesn’t have something like that in its history?
[deleted]
[deleted]
Just buy more money
This article is interesting but it really needs proof-reading. There are some missing parts, poorly structured parts that are hard to understand. Would be great to read the corrected version
A sufficient fraction of the population who practices honesty and the Golden Rule, which go a long way. One thing that helps with that is to really believe that we are and will be accountable to God, i.e., so that even when no one is watching, doing the honest and kind thing matters to oneself and one's own self-respect. Without this sufficient fraction of the population, it will be very hard to maintain the rule of law anywhere, I think.
Also very important, I think, are literacy and education in general, which is more available than ever before (see for example other discussion around WGU and BYU Pathway Worldwide, like at https://news.ycombinator.com/item?id=31180816 or in wikipedia). They are accredited, online, and tuition at least for BYU Pathway Worldwide is vastly lower for students in poor countries, with support system etc etc, even if one doesn't yet know English.
There are just so many opportunities, if we are willing to strive to be consistently honest and decent toward each other (...and of course, work and plan, as others point out in various ways...).
edit: more at my web site (in profile, simple, skimmable, & nothing for sale).
Thoughtful comments appreciated with any downvotes.
Also very important, I think, are literacy and education in general, which is more available than ever before (see for example other discussion around WGU and BYU Pathway Worldwide, like at https://news.ycombinator.com/item?id=31180816 or in wikipedia). They are accredited, online, and tuition at least for BYU Pathway Worldwide is vastly lower for students in poor countries, with support system etc etc, even if one doesn't yet know English.
There are just so many opportunities, if we are willing to strive to be consistently honest and decent toward each other (...and of course, work and plan, as others point out in various ways...).
edit: more at my web site (in profile, simple, skimmable, & nothing for sale).
Thoughtful comments appreciated with any downvotes.
The book's theory is that success starts by first focusing on productivity of agricultural land, to maximize output, not profit. To accomplish that, you need lots of farmers who are motivated to maximize output, which means land distribution so that farmers are working for themselves, rather than as laborers where the landowner takes all. Once there is a broad base of farmers, and the country has food sovereignty, limited import funds can't be drained away just to make sure everyone is fed. And once there's a broad farming base, that is accumulating savings, that means that 1) banks can start making loans for the beginning of industry, and 2) there's a strong farmer consumer base that can be customers of this early industry.
Countries like Japan, Taiwan, and South Korea that practiced land reform to wrench land away from idle landlords and distribute it widely, have had this success. And countries that feigned it, like the Philippines, have struggled in comparison.
Land really is different from capital, there's a finite amount of it, whereas more capital can always be made. Redistributing hoarded land should be a primary function of government, or at least a government that wants to grow the economy, rather than grow wealth inequality.