Wednesday, April 03, 2013
Superior Mayan engineering
I met a Mayan engineer on the plane last December. He was headed to Detroit to learn something about some mechanical engineering thing that I didn't understand. He handed me his business card, very politely, and made fun of me and all other Americans for predicting an apocalypse later that week. He told me that the Mexican economy was doing great, especially in the south of the country, and that I should come to visit him in Mexico City.
Now, if I were Tom Friedman, that conversation would be enough to make me believe in the power of the Mexican economic miracle. But I'm not Tom Friedman, so instead I decided to check the numbers. Here is Mexico's GDP per capita (PPP):
As you can see, the income of the average Mexican, after stagnating in the early 2000s, took off in 2003 and has grown by over 64% since that time (more, since that data is from 2011). That is a 6.4% annual rate of growth! (Update: Oops, I noticed that this wasn't inflation-adjusted. The actual numbers are more modest; here's the inflation-adjusted series from 1995 through 2010, and here's Mexico's real growth rate since 1999. The actual growth is more modest than the non-inflation-adjusted number, but still solid.)
OK, so the "average" Mexican is quite a bit richer than two decades ago. But is that the median, or the mean? Aren't all those gains being pocketed by the rich? Well, as it turns out, no. In 1998, Mexico's Gini coefficient was 53.1; in 2008, it was 51.7. Now that's a small change, but the fact that it's negative means that Mexico's poor and middle class have shared equally in that rapid growth. Of course, the number is still too high, and that tiny change is not a trend. But Mexico's rising tide is lifting all boats.
It's not hard to see what's driving the growth: Mexico's exports have exploded since NAFTA and more than doubled since 2003. Most of those exports go to the U.S., but Mexico is diversifying its markets to places like India. Nor are those exports things like fruit and oil and minerals; Mexico is a booming manufacturer of cars, electronics, aircraft, and appliances. In fact, Mexico exports more manufactured products than the rest of Latin America combined. Mexico - not China - is now the world's leading exporter of flat-screen TVs and fridge-freezers. Those are high-tech products, and those factory jobs are good jobs. Mexican engineering is powering the world...or this corner of it, anyway.
So what's the point of this post? "Yay Mexico"? Well sure, but actually it's a lot deeper than that. It's about two competing narratives of how countries become rich and happy.
For a long time, Mexico and other Latin American countries - and countries elsewhere in the Global South, like India - couldn't pull off the trick of getting rich. They tried import-substituting industrial policy...didn't work. They tried free trade and deregulation...didn't work. Some experimented with forms of quasi-socialism...didn't work. The lands of Europe and America and Japan, the former imperial powers, were rich and powerful and industrialized; the lands of the South were agrarian, resource-based, poor, and hideously unequal, and nothing seemed likely to change that.
I'm not sure, but I have to imagine that this repeated failure made a certain narrative of national development very seductive in Latin America. That narrative goes like this: Rich countries get rich by stealing their wealth. Imperial powers got rich because they seized the wealth of the lands they colonized. And they stay rich by continuing to exploit the resource wealth of the poor countries in the global South. Even within rich countries, the rich people get and maintain their wealth by forcibly extracting labor and land from the poor people. In other words, there is a lump of wealth in the world, and it goes to the people who have the power.
We've all heard that narrative at some point.
Now, I don't want to get too down on people who believe that narrative, because that really was the way the world worked for many thousands of years. Almost all economy was farming, logging, mining, fishing, etc. The only capital was land, and land was fixed. Grab the land, and you grab the wealth. A zero-sum game where kings ruled and slaves starved.
And in plenty of countries today, something similar is still true. In countries suffering from the "resource curse", most of the income comes from oil drilling, or mining, or farming, or logging - in other words, from land. The people who own the land get fabulously rich, and the poor people languish in poverty, with little to do but open little shops and stalls in the slums, or work the mega-farms of the land barons. The rich people buy the government, and use it to stifle any attempt at a change in the status quo. Meanwhile, the government doesn't invest in things like education and health, because its tax revenues come from land instead of human capital.
So the zero-sum narrative is not obviously wrong and dumb. But it's not the only narrative. And it is not the narrative of industrialization. And we know this because of...South Korea.
South Korea has never had its own empire. It was desperately poor, a tributary of China and Russia, then a colony of Japan. It has no natural resources to speak of. And yet, beginning in the late 20th century, South Korea began to get rich very rapidly. And it continued getting rich. And now it is rich. With those riches came not a rise but a fall in inequality, and of course huge improvements in health. The rising tide lifted all Korean boats. Nor has that country been blighted by pollution. In fact, South Korea is just an awesome place to live.
How did South Korea pull off that trick?
Well, no one knows exactly what worked and what didn't; all we see is the overall result. But in general, South Korea followed a blueprint outlined by America, Germany, and Japan. That blueprint is called, for lack of a better term, "manufacturing-export capitalism". We don't really know what countries can do to get rich, but the really successful ones all seem to do something that looks like "manufacturing-export capitalism". And it's basically what Mexico is doing right now.
What is "manufacturing-export capitalism"? Basically, it involves policies designed to get a country to export as much manufacturing output as possible. That means, first and foremost, capitalism, since private companies are good at exporting manufactured goods and state-owned companies are not. But it usually involves a huge raft of government policies to get the country into a position to do lots of manufacturing exporting. Those include education (because you need a literate workforce), public health (because you need a healthy workforce), infrastructure investment, urbanization (because you need the workers close to each other and to consumers), property rights (especially for farmers to sell their land and move to the cities), and rule of law. It also means giving the working class the feeling that they have a stake in the economy and society, that society cares about them and not just the rich people. That's really important, since strikes and labor strife can make a country a very unattractive hub for manufacturing.
"Manufacturing-export capitalism" also involves trade. Lots of trade. Not necessarily "free" trade, though. It's not clear why, but things like a cheap currency and various types of "financial repression" seem to really help. Export incentives, FDI incentives, and other types of industrial policy also seem useful, though probably less crucial than the cheap currency. "Free trade" agreements with rich countries (e.g. NAFTA) are essential for securing markets for a developing country's manufacturing exports.
Why does "manufacturing-export capitalism" work so well? No one really knows, but it looks like the model that works. Actually, economists do have a sort of theory of why it works - namely, Paul Krugman's "New Economic Geography". But it's a pretty simplified version of the real thing.
But in that theory, there's a catch - not all countries can industrialize at once. There's only a certain amount of manufacturing exports that the rich countries can absorb. So countries have to wait and develop one by one, which is unfortunate, and which is frustrating. Actually you can almost see this happening in East Asia - first Japan got rich, then Korea and Taiwan, now China, tomorrow maybe Vietnam. Yes, it's crappy to languish in the queue while the fast movers finish their economic miracles...but the good news is, the more rich countries there are, the more can industrialize at the same time.
So who gets to hop on the development train first? Education, health, urbanization, functioning government, and "inclusive institutions" definitely seem to all play a role, but proximity to a rich country seems to really help. Which is almost certainly why Mexico is the first of the Latin American countries to take off into full industrialization mode - if that is what is truly happening there.
Of course, "manufacturing-export capitalism" has eventual costs. When growth slows and the economy shifts toward services, the institutions that encouraged manufacturing exports are no longer relevant and often become parasitic and stifling (this is evident in Japan, for example). But by then, a country is rich.
So Mexico can win at the game of national development. It can do what South Korea did. And it may already be doing it.
Of course that leaves the question: Should Mexico get rich? The answer is "Of course yes!" Even if you don't think big houses and shiny cars are the true measure of human welfare, you should remember that rich countries have much better health than poor countries. They have much better natural environments than poor countries (though about half of that improvement comes from exporting polluting activities to poorer countries lower down the development chain). They have much less starvation and insecurity than poor countries. And they are happier.
(This doesn't mean I think that the Right has it right in Latin American countries. I know little about the situation, but anecdotes suggest that conservative forces are typically much more interested in preserving the corrupt, land-based economy in which they live like kings, than in kicking off real broad-based industrial development. Anecdotes also suggest that center-Left leaders, like those currently in power in Brazil, often seem to be the most open to modernization and development.)
(This also doesn't mean I think everything is great in Mexico. Far from it! Mexico has a bloody gang war, high inequality, an education system that needs lots of work, and still a lot of poverty. But I do think Mexico is on the right track in terms of economics.)
In any case, back to the master narrative: Real national wealth does not come from theft. It comes from reorganizing society into a more productive form. As South Korea did. As Japan did before that. As Mexico is hopefully doing right now. The nations of the Global South were late to the industrialization party, but I think they are finally here.
Don't believe false narratives. If you think the apocalypse is coming, chances are you're just going to get laughed at by a Mayan engineer on a plane.
(See? I gave it a schmaltzy Tom Friedman ending after all!)
Subscribe to: Post Comments (Atom)
"South Korea is just an awesome place to live."ReplyDelete
It ain't bad (I actually prefer it to Japan), but there have been costs.
The education system is pure exam hell for kids. There's pretty much only one accepted path for success in society: "SKY" University (Seoul Nat'l, Korea, or Yonsei) and then a job at Samsung. There's a *severe* shortage of entrepreneurship, or even a successful SME sector like Taiwan or Germany.
Aside from Samsung, the chaebol make miniscule profits (or none). Just like keiretsu, they're all diversified into way many business lines (the few highly profitable Korean companies, like POSCO, Hyundai Heavy [ships], and Hyundai Motors, all stick to their knitting). How many *really* successful chaebol are there besides Samsung? (no, LG doesn't really qualify)
The roots of this probably lie in the credit rationing policies of Park Chung Hee, who took a dim view of foreign equity financing (economic "colonialism" and all that), so it relied on loans (mostly Japanese) which were doled out to favored firms. The implicit TBTF backstop encouraged gambling on big investments (the Japanese thought the Koreans were crazy to get into shipbuilding, for example).
Many of these gambles like steel and autos worked (supplying the Vietnam War helped). But...
1. They could have failed big time
2. They concentrated econ activity into a few favored firms (who maintain their bloated size through "cross-shareholding" today, similar to keiretsu).
So the results have been decidedly mixed, imo. Embracing FDI, w/o the govt filter on loans, would have led to a much healthier structure.
I don't disagree, but look at the problems Japan faces...or the U.S...or Europe. Is Korea really so much worse off? I doubt it. And Korea's per-capita GDP is about to pass that of Japan...Delete
Re: Japan per cap GDP (PPP). Yes, true but:Delete
1. Japanese per cap income is not exactly the highest bar (18/34 in OECD, and slightly below avg)
2. Taiwan already passed Japan ($38,000 vs. $36,000, CIA factbook)
I would prefer to see Taiwan, with its healthy SME sector, as the model for development rather than Korea. Too many developing countries see Korea and think that the secret to success is to create huge nat'l champions like Samsung, even though the conglomerate model has not really worked for other Korean firms (or even in Japan, where some keiretsu are finally getting the message).
I get the impression the Taiwanese govt was somewhat less heavy-handed re: industrial policy than Korea, which allowed for fewer behemoths. Can anybody give me some pointers/correction on this?
"which allowed for fewer behemoths"Delete
"As protected firms become less innovative, a country’s overall economic growth may suffer. This is because, as Schumpeter emphasized nearly a century ago, economic growth thrives on “creative destruction.” In a healthy economy, new firms constantly arise to challenge older, less-innovative behemoths. One of the leading experts on entrepreneurship, Amar Bhidé of the Columbia Business School, has argued that big firms, encumbered by larger internal bureaucracies, are virtually incapable of capitalizing on radical ideas. Indeed, research finds that new firms are more likely than existing firms to license novel technology. And compared with larger firms, smaller firms are about twice as likely to file “high-impact” patents." - Matthew Mitchell, The Pathology of Privilege: The Economic Consequences of Government Favoritism
Doesn't their dominance on LPGA golf tour show that Korea has highest standard of living in the World?Delete
Doesn't this imply that here young women have massive free time and lots more opportunities to play golf than young women anywhere else in the World?
I think a few of the "big investments" actually did fail. South Korea got big into steel production, but their attempts to get big into aluminum production failed.Delete
The education system is pure exam hell for kids. There's pretty much only one accepted path for success in society: "SKY" University (Seoul Nat'l, Korea, or Yonsei) and then a job at Samsung.
To be fair, Samsung really is a leviathan of a firm - its revenue is something like 21% of South Korea's entire nominal GDP. It would be like if a firm in the US had a revenue of $3.28 trillion a year, which would be close to that of the US government.
Korea's in a sweet spot. It has tons of smart, hard-working engineers and white collar workers who are by now equal to their Japanese counterparts but cost far less (in nominal terms). The tech gap with Sony et al has narrowed tremendously over the last decade (in some areas Korea has pulled ahead).ReplyDelete
But how long can this last? Korea shares the same demographic problems as Japan and Europe (just postponed about 15-20 years). China knows the playbook now--just look at how Lenovo, Haier, Hisense, ZTE have grown recently. This next decade is going to be tough for Korea.
PS. The US standard of living is def better than Korea (I can attest). How much of this is due to "exorbitant privilege" of the USD? Prob a lot, imo...
A bit of it is that, but a lot of it is that we have a lot of cheap land, which makes our houses bigger, which is a lot of what people look at with regards to standard of living.Delete
South Korea (and Europe, for that matter) grew at a time when Americans and, later, Europeans were able to absorb increasingly large amount of cheap exports. Even if the real American growth rate was around 3-4% that, for a long time in real terms, represented 10+% of Korea's economy. That is, real growth in American income was larger than real growth in Korean income. Total rich world growth was greater than total poor world growth.ReplyDelete
This is why growth rates, by themselves, are misleading. Today, China grows at over a trillion dollars a year. Even if you ignore China as a middle-income country, Mexico, India and all are growing at rates that cannot be absorbed by Americans the way Asian Tigers did 50 years ago.
China has passed USA as the biggest trade partner for many countries and this isn't surprising. But for the first time, developing-developing trade represented more than developing-developed trade. That's huge.
Now you have to divide developing into "really developing" and "developing but basically rich". The latter group now has to absorb the manufacturing of the former. And this excludes the mess that is most of Africa.
I am very doubtful of how much export-oriented growth can finance the development most countries need. Mexico might be an exception because of its cultural and physical proximity to the US (it's in America's interest to ensure that Mexico is sufficiently rich).
India offers a more promising model not so dissimilar from the US, growth fueled by domestic consumption. America's growth, in some sense, can be broadly divided into the industrial policy that dominated the Reconstruction period to Interwar period. Then the technology driven growth sparked by WWII.
India is in some ways a marriage of the two (but it's also sadly a marriage of the 18th, 19th, 20th, and 21st century) . With better labor regulations, rule of law, and government investment I get the sense that it's better.
Of course... There might be some, huge, American technological revolution waiting to burst and we may start growing at 5-6% again at which point we could easily absorb a lot of the necessary exports...... And maybe pigs can fly.
I think you're basically right...Delete
False narratives? I always knew that the "race to the bottom" narrative that used to be so popular with liberals was nonsensical. Why? Because, unlike liberals, I grasped the concept of the invisible hand.ReplyDelete
If aliens landed on our planet tomorrow...would they be interested in taking or trading? Which one is the false narrative? They developed the capability to travel to other inhabited planets...how? By taking resources from each other? No...by trading. They learned the value of trading. They learned the value of allowing others to say "no thanks". They learned that progress depends on other people's freedom.
So even if the aliens could simply enslave us and take our resources...they wouldn't. And by the time we're capable of visiting other inhabited planets we'll also have learned the value of trading rather than taking.
How far are we as humans from understanding why trading is superior to taking? Well...tax choice has less than 20 likes on facebook. It sucks being ridiculously ahead of my time.
Last sentence is too long by six syllables.Delete
Last sentence is too long by six syllables.Delete
I had to count twice.
Jazzbumpa, oh, I see what you did. "It sucks being ridiculous". Basically you said that I'm being ridiculous. But that was it. I mean, I think it must suck to be you if that's all you're capable of. Why not prove that you're capable of something more substantial? Is it really that difficult for you to come up with something more substantial than simply saying that somebody else is being ridiculous?Delete
Let me get you started...
The chances are good that any visiting aliens wouldn't have learned that trading is superior to taking because...[this is the part that you fill in]
Need a hand? How about because scarcity is only a problem that we confront here on earth? LOL. It's funny because somebody actually made that argument.
How about because it's possible that the aliens have a hive mentality? Errr...somebody tried that one as well. Yeah, because everybody thinking alike is a sure way to come up with new and innovative uses of society's scarce resources.
There you go...I've provided two lousy arguments. Now it's your turn to provide at least one good argument. But if you were truly capable of providing one good argument...then I think you would have done so from the get go. Here's your chance to prove me wrong...
You seem to know an awful lot about space aliens. Maybe you should come in for a DNA check?Delete
I'm somewhat doubtful about this, how did the Netherlands and Great Britain get rich in the first place? Not by exporting manufacturing to already rich countries.ReplyDelete
Funny you pick the two countries with famous "East India Companies". Nah, no coincidence...Delete
Northern European countries didn't get rich in a big way until they industrialized. There's legitimate skepticism that trade alone explains the Industrial Revolution. Joel Mokyr cites the Enlightenment and the Scientific Revolution as the key movements preceding the IR.
Review of Mokyr's "The Enlightened Economy: http://www.deirdremccloskey.com/articles/mokyr.php
Worthwhile paper by Deirdre McCloskey on why slavery and imperialism don't explain the IR either:
So much ignorance about economic history in one place and post! Go read Deirdre McCloskey, for God's sake! For one, export-oriented development doesn't explain Europe. And some of the "miracles" -- how many more miracles do se need to stop calling them that? -- overlapped. It is the Bourgeousie, fellas!Delete
How GB and Europe then grew is mostly irrelevant to the question how or why China or Mexico are now growing?
Some plants grow in the ocean. Some in rivers. Some on land. Some in the air. They have things in common and differences.
The great biologist will see and understand the differences, not confusing the familiar with the necessary.
IOW it is you who are ignorant.
Ashok, Alexander, how GB and Europe then grew is relevant to Noah's post, which included this statement: "We don't really know what countries can do to get rich, but the really successful ones all seem to do something that looks like "manufacturing-export capitalism. ... There's only a certain amount of manufacturing exports that the rich countries can absorb. "."Delete
If all really successful countries get rich by manufacturing-export capitalism, which involves exporting heaps of manufacturing exports to rich countries, which were those rich countries that the Dutch and British exporting to when they first industrialised?
Ashok: were the Dutch and British East India Companies exporting manufacturing on a large-scale to East India?
I'm not ignorant and apologize if I sounded a little offensive. Let me explain a little better. Since 1800 the world economy has been growing on a pace without precedent in the History of mankind. McCloskey call this "The Great Fact" -- that is: before 1800 almost everybody was extremely poor, living with the equivalent of three dollar per day (give or take two). But beginning in the Netherlands in the 1700s, and then closely followed by England -- and then the rest of Europe, and then the United States, and Japan, and [insert your favourite "miracle"] -- the world escaped from the malthusian trap and modern growth was borned. The world became richer by a factor of at least two orders of magnitude. This is robust, prolongued, enormous economic growth: it cannot be explained by little toys like "export-driven development" or whatever. And this kind o growth can be launched extremely fast: two generations brought South Korea from pre-1800 kind of poverty to our modern bourgeois prosperity that so many of you simply take for granted. Is it not the case that probably something more fundamental is in play here? Something that explain French and Australian kind of prosperity despite their differences in history, legal system, labour laws, dependence from foreign trade, immigration, etc.? If this kind of questioning arose your interest, I would greatly recommend that you read some Deirdre McCloskey. She argued persuasively that none of the "materialistic causes" favored by economists can explain the kind of disruption we've seen in the last few centuries: Neoclassical models Harberger triangles can perhaps explain the shape of the beach -- why Australia is 10% richer than France --, but not the great wave of growth and innovation that fundamentally modified the level of the sea -- why Australia and France have incomes of US$ 30.000 in the first place.
If you find these thoughts intriguing, then you'd probably like this paper, in which McCloskey herself summarize her ideas on this issue:
The book examines in detail, and rejects, the merely Samuelsonian and allocative theories of how the modern world came to pass—such theories as those focused on expanding foreign trade, thrift, commercialization, investment,
imperialism, slavery, new property rights (they weren’t new in the 17th century, I claim). The reshuffling of property rights by such re-allocation isn’t it. Mere efficiency, moving to a production possibility curve, is neither necessary nor sufficient. What does explain the Most Surprising Event in Economic History is an Austrian
matter of discovery, Kirznerian alertness unleashed by what I call the Bourgeois Revaluation. A change in ideology—or “rhetoric”—about markets and innovation created the mad scramble, and our riches, and our freedoms. In other words, I am proposing an idealistic as against a materialist account of the modern world. Many of us, left or right, were marxoid materialists 1890-1980. Time to move on! The conclusion is that dignity and liberty (not liberty alone, note) for ordinary people made modernity. It was a sociological and political change, not in the first instance psychological (Max Weber) or economic (Karl Marx) or legal (Douglass North)
A bit offensive, hell you are more offensive than I am, which is saying something. :<)Delete
Second, forget the blah, blah, blah stuff. I got all that, long ago. You got lots of facts, but no theory.
Now, here is the theory, very simple version, for someone at your level.
Knowledge is a factor of production and is the key factor, for it is a substitute for all other factors. Any policy that promotes the development of knowledge, the spread of knowledge, the application of knowledge will promote growth. Many of the points you make do one or more of these and so they help. It appears that there are increasing returns to scale. The more you promote knowledge, the better.
And, look at the policy outcomes. Look how stupid the attempt by the Fed was to raise rates in 2007, killing real estate. Real estate finances state and local gov't. So what he fed really did was kill off large parts of our institutions for creating and spreading knowledge and now, what do we have? No recovery.
A development theory to explain the sixty years it took South Korea to mostly catch up to the West does not have to explain the six hundred years it took Europe to travel the same path.Delete
In Europe all aspects of the economy had to develop in parallel in one giant inter-dependent eco system constantly pushing the limits of the available technology. South Korea could be an incremental producer to that existing system reaping the benefits immediately and essentially for free of six hundred years of technical progress.
"I'm somewhat doubtful about this, how did the Netherlands and Great Britain get rich in the first place?"Delete
Classical liberalism. It's the argument that society should be given more control over how society's resources are used. Classical liberalism is a very modern phenomenon. For most of recorded history it was a king or emperor who controlled the power of the purse.
"When that "divinity" which "doth hedge a king," and which in our day has left a glamour around the body inheriting his power, has quite died away - when it begins to be seen clearly that, in a popularly-governed nation, the government is simply a committee of management; it will also be seen that this committee of management has no intrinsic authority. The inevitable conclusion will be that its authority is given by those appointing it; and has just such bounds as they choose to impose. Along with this will go the further conclusion that the laws it passes are not in themselves sacred; but that whatever sacredness they have, is entirely due to the ethical sanction - an ethical sanction which, as we find, is derivable from the laws of human life as carried on under social conditions. And there will come the corollary that when they have not this ethical sanction they have no sacredness, and may be rightly challenged.
The function of Liberalism in the past was that of putting a limit to the powers of kings. The function of true Liberalism in the future will be that of putting a limit to the powers of Parliaments." - Herbert Spencer
The problem with centralization is that it prevents heterogeneous activity. Massive amounts of society's limited resources are gambled on the wrong horses.
"This is a gross fallacy; but one that has been productive of infinite mischief, inasmuch as it has been the pretext for a great deal of shameless waste and dilapidation. The value paid to government by the tax-payer is given without equivalent or return: it is expended by the government in the purchase of personal service, of objects of consumption." - J.B. Say
"Mischief begins when, instead of calling forth the activity and powers of individuals and bodies, [the government] substitutes its own activity for theirs; when, instead of informing, advising, and upon occasion, denouncing, it makes them work in fetters, or bids them stand aside and does their work instead of them." - J.S. Mill
"If the socialists mean that under extraordinary circumstances, for urgent cases, the state should set aside some resources to assist certain unfortunate people, to help them adjust to changing conditions, we will, of course, agree. This is done now; we desire that it be done better. There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it." - Frédéric Bastiat
Classical liberals understood that having resources isn't as important as what is done with them. And what is done with resources depends on how much freedom people have to apply their unique perspectives to their limited resources. Markets greatly increase the rate of progress because producers have the freedom to use their resources in innovative ways and consumers have the freedom to reach into their wallets and give valuable feedback to the producers who give them the most bang for their buck.
In my post on the The Magna Carta Movement...I discuss Ralph Raico's excellent lectures on classical liberalism and the Dutch "miracle".
Absalon: A development theory to explain the sixty years it took South Korea to mostly catch up to the West does not have to explain the six hundred years it took Europe to travel the same path.Delete
Perhaps not. But I was responding to Noah's post which, as I quoted above, was making rather more ambitious claims than just explaining South Korea's growth. If you assert that X is the only way a country gets rich, then your theory has to explain all examples of rich countries, not just a subset.
Tracy, maybe you should re-read your citation of Noah's claim a little more carefully.Delete
Mattski, maybe, but I doubt it. If I had actually misunderstood Noah's post, in all likelihood you'd've pointed my error out, not just made this vague comment.Delete
If you accuse Noah of making a claim that he clearly did not make then you're not adding anything to the discussion. On the contrary.Delete
Mattski, what you say has a good deal of truth on it,and I feel glad that I avoided the fault you identify and instead made a comment carefully connected to what Mattski clearly did say.Delete
Good grief, Tracy. I guess I have to spell this out don't I? For starters, how you can read this post as a sweeping theory of the history of economic development is certainly a mystery. Noah is clearly talking about the last 100 years or so, if not the last 50 years of economic history (the story of South Korea's successful development.) Thus Absalon's point, which is congruent with Noah's. There is good reason to believe that early and pre-industrial development differed in many significant particulars to the development of recent history.Delete
Add to that, you have Noah claiming, "X is the only way a country gets rich." Now look at the passage you cite,
"We don't really know what countries can do to get rich but the really successful ones all seem to do something that looks like "manufacturing-export capitalism. ... There's only a certain amount of manufacturing exports that the rich countries can absorb."
I read that, I see words like "we don't really know" and "seem" and "looks like". It doesn't add up to your characterization, and it certainly doesn't pretend to stretch back into history indefinitely. So, yeah, maybe you should read more carefully.
Mattski, on your claim that you think that Noah was commenting about the last 100 years or so, my original careful reading of Noah's post covered this sentence:Delete
But in general, South Korea followed a blueprint outlined by America, Germany, and Japan. That blueprint is called, for lack of a better term, "manufacturing-export capitalism".
Now, America, Germany and Japan started getting rich earlier than South Korea. Japan beat Russia at war in 1905, which is over 100 years ago. Noah is clearly talking about a far wider sweep of history than the last 100 years ago (let alone the last 50 years).
There is good reason to believe that early and pre-industrial development differed in many significant particulars to the development of recent history.
And if you or Noah spell out how you think these differences make the examples of Britain and the Netherlands irrelevant, I will read what you say with interest (and, of course, carefully). My pre-existing awareness of this possibility is why my original comment was a question, and prefaced with "I'm somewhat doubtful about this".
As for your complaint about my quoting, I note that we are both commenting on Noah's original post, so anyone wishing to check Noah's exact words and caveats is free to scroll up and read that post. Your suggested standard strikes me as sacrificing brevity for no gain in reader information. I note even you yourself don't live up to your proposed standard as you've not included a single quote of my uncertainty in my original comment.
So, yeah, maybe you should read more carefully.
Maybe, but I doubt it. I am feeling even more confident that I read Noah's post with the perfect level of carefulness than when you first brought this topic up.
Japan beat Russia at war in 1905, which is over 100 years ago.Delete
Seriously? Look, you asked a rhetorical question above,
which were those rich countries that the Dutch and British exporting to when they first industrialised?
This looks to me like an amateurish attempt at Gotcha. Does it take a genius to figure out that some countries had to be first to industrialize and become relatively wealthy and that obviously, those countries didn't have wealthy nations to sell to... there weren't any! This is what characterizes early economic development, the lack of wealthy trading partners. And that is a fundamental difference to the recent history Noah's post addresses.
Why don't you apply your "perfect level of awareness" to the theory Noah references as the best explanation of why manufacturing-export capitalism works so well? Get back to us when you decide what period of history it concerns itself with. Thanks.
This looks to me like an amateurish attempt at Gotcha. Does it take a genius to figure out that some countries had to be first to industrialize and become relatively wealthy and that obviously, those countries didn't have wealthy nations to sell to... there weren't any! This is what characterizes early economic development, the lack of wealthy trading partners. And that is a fundamental difference to the recent history Noah's post addresses.Delete
Yes. The idea here is that Britain and the Netherlands had a "captive market" because of their large colonial empires. That doesn't mean, however, that the colonial empires lost out from that trade, so that game needn't have been zero-sum.
And nowadays, according to the hypothesis, rich countries are a much better source of demand for the manufacturing exports of rapidly growing countries...this allows countries like Korea, China, etc. to industrialize faster now than Britain did back in the day.
Mattski: "Japan beat Russia at war in 1905, which is over 100 years ago."Delete
Yes, seriously. You could check this information at your local library, if you don't trust Wikipedia nor Google.
This looks to me like an amateurish attempt at Gotcha.
Sadly it looks to me like that too. But I'm sure that with a bit of effort you could move up to the professional level. Or (my preferred option) you could stop your attempts at Gotcha and try actual rational debate about the ideas in question.
Does it take a genius to figure out that some countries had to be first to industrialize and become relatively wealthy and that obviously, those countries didn't have wealthy nations to sell to... there weren't any!
I agree with you entirely that it doesn't take a genius to figure this out. That's why I didn't bother spelling out this point, instead I just asked my question. I assumed that my readers would be intelligent enough to figure this out, and I am glad that you, at least, live up to my expectations on this point.
This is what characterizes early economic development, the lack of wealthy trading partners. And that is a fundamental difference to the recent history Noah's post addresses.
Yes, and why do you and Noah think it is a relevant difference? If Britain and the Netherlands could develop without wealthy trading partners, couldn't current poor countries develop by selling to other poor countries now?
Why don't you apply your "perfect level of awareness"
Why don't you apply your own advice to read carefully? First you missed Noah's references to events well before one hundred years ago, now you are misquoting me. If you had followed your own advice, you'd note that I said that I had read Noah's post with a "perfect level of carefulness".
Get back to us when you decide what period of history it concerns itself with. Thanks.
How about we make a deal? You agree to read and quote what I and Noah say carefully, you are after all fairly intelligent, in amongst the nonsense above for example you managed to figure out (unaided!) the relevance of my comment about the Netherlands and Britain, and once you've done so for two comments then I will carry out this request to the best of my ability. Deal?
Noah: Thanks for your reply! I'm sorry you quoted that stuff about Gotcha. I like a bit of fencing with people like Mattski, but I did actually start with engaging seriously with your ideas, and I do appreciate how Mattski does occasionally make a relevant point in amongst the Gotcha attempts.Delete
The idea here is that Britain and the Netherlands had a "captive market" because of their large colonial empires.
Doesn't this imply that currently poor countries therefore don't need to wait for what the rich countries can absorb, but could start getting rich by exporting to other poor countries as well?
And nowadays, according to the hypothesis, rich countries are a much better source of demand for the manufacturing exports of rapidly growing countries...this allows countries like Korea, China, etc. to industrialize faster now than Britain did back in the day.
But surely any country now could industralise faster than Britain did? Britain had to both invent new technology, and figure out how to implement that technology in the context of Britain's particular geography and society. Countries like China and Korea can buy in the latest technology, and draw on experiences from countries as diverse as Canada to Singapore about how to apply it to their own societies' context. Assuming that people in china now are at least as intelligent as those in Britain 200 years ago, I'd expect the process of industrialisation to be faster just on that basis alone. (It's why we have education in the sciences, because most of us can learn what others have invented, such as Newtonian physics, far faster than we could reinvent it ourselves).
I have much more detailed thoughts on this post if you're interested:ReplyDelete
"They tried free trade and deregulation...didn't work."
May I ask which specific developing countries you are referring to?
Basically sub-Saharan Africa.Delete
This hardly seems like solid evidence to dismiss free trade and deregulation as ineffective in promoting development. Correct me if wrong, but most sub-Saharan African countries lacked (and still lack):Delete
1. Basic infrastructure (reliable electricity, CLEAN WATER)
2. Sound currencies and financial systems (thus Africans in places like Kenya are rapidly turning to alternative payment systems like M-Pesa)
3. Transparent, largely corruption-free governments
Look at the World Bank "Doing Business" rankings for the sub-Saharan countries. Most are near the bottom. Obv deregulation and free trade won't do much if the country is saddled with numerous other problems.
Besides sub-Saharan Africa, what other examples are there?
Noah, the answers you seek are within this sentence, "He was headed to Detroit to learn something about some mechanical engineering thing that I didn't understand."ReplyDelete
The key factor of production is knowledge, which is a substitute for all other factors of production. For example, as K increases, the need for capital declines. Why K = efficiency. Greater efficiency permits doing the same with less capital.
Since Miles didn't have an economics that included knowledge as a factor of production, he really didn't teach you what you needed to learn.
Time to apply your very considerable skills, striking out on your own, and creating a model of economics, at least for yourself, of which the principal factor of production is knowledge.
You write about economic models without ZLB, etc. Write an economic model with only one facet, knowledge. Apply that to real world facts and see what happens. You will find that it is highly predictive and leads to the right policy choices.
Try this one. What is the optimal interest rate for maximizing the greatest spread of knowledge throughout the United States? Given that most knowledge is spread by state and local government, interest rates should be set so as to maximize state and local tax collections--i.e., you want rapid increases in real property values.
i.e., you want rapid increases in real property values.Delete
What could possibly go wrong?
May I borrow a Tolstoy quote and repurpose it..ReplyDelete
"Happy families are all alike; every unhappy family is unhappy in its own way"
"Rich countries are all alike; every poor country is poor in its own way"
Not perfect, but satisfying to over simplifying something so ridiculously complex.
Those include education (because you need a literate workforce), public health (because you need a healthy workforce), infrastructure investment, urbanization (because you need the workers close to each other and to consumers), property rights (especially for farmers to sell their land and move to the cities), and rule of law. It also means giving the working class the feeling that they have a stake in the economy and society, that society cares about them and not just the rich people.ReplyDelete
Please mention this to Washington DC, for not continuing to do these things (with the possible exception of urbanization, don't know about that one) well is sending us backwards...
(and just for what it's worth, 'saving' isn't on that list, just in case you turn this into an Atlantic Monthly article...)
I'm happy to find numerous useful info here in the post. I would really like to come back again right here for likewise good articles or blog posts. Thanks for sharing..ReplyDelete
Top 50 MBA Colleges in India
But Brad Delong is a war criminal for all the terrible damage NAFTA did in Mexico!ReplyDelete
This is an excellent post. Thanks.
But Brad Delong is a war criminal for all the terrible damage NAFTA did in Mexico!Delete
David Graeber says that. Brad DeLong did a post the other day about using a bot to make fun of Graeber. Brad quoted some of Graeber's responses but I went to Twitter to get this (there are similar passages on Brad's blog):
David Graeber @davidgraeber 23 Feb
@delong again the guilty conscience speaks! Chiapas war crimes tribunal waiting for you, Brad. How they would love to get their hands on u
He only used a bot to time the release of his insulting tweets. He actually wrote the insulting tweets himself.Delete
He only used a bot to time the release of his insulting tweets. He actually wrote the insulting tweets himself.Delete
I did not mean to suggest otherwise.
Given that Graeber threatened litigation in one of the tweets Brad quoted, perhaps in future Brad should limit the bot to republishing selected things that Graeber has written - such as the passage about a war crimes tribunal in Chiapas. Editorials and adjectives are unnecessary when the source text will do. :-)
Graeber threatened litigation? I thought he was an anarchist (term not necessarily used perjoratively). Can anarchists do that? Should he not have the whole world get together in a yurt and by unstructured discussion find a consequentialist solution to the problem?Delete
"Fair?! Who's the fucking 'nihilist' here?!"
- Walter Sobchak
Yes, Absalon, that was what I was referencing.Delete
The paragraph the begins "What is 'manufacturing-export capitalism'?" sounds a lot like the post WW II America I grew up in. Probably not a coincidence.ReplyDelete
And what policies do we have now?
Capitalism? No - trans-national mega-corporatism, quite a different and even more viscous animal.
Education? No we are gutting education from preschool on up to the highest levels of academia.
Public health? The R's in the house have tried to repeal Obamacare over 30 times; we have by far the highest costs in the world and are something like 27th in outcomes.
Infrastructure investment? Our bridges are falling down, pipelines bursting the electrical grid is unstable and nobody cares.
. . .
Giving the working class the feeling that they have a stake in the economy and society? Just compare now to 50 years ago before the decline of the middle class began.
That society cares about them and not just the rich people. Every penny of GDP growth and productivity gain over 4 decades has been captured by the upper 50%, and disproportionately more as you go up the ladder. It's all about the rich all the time.
Well good for Mexico.
But the U.S. - ew truly are in a race to the bottom.
America's a very developed country so that's kind of irrelevant. We should still invest in infrastructure and education and all that jazz, (since those sorts of things promote welfare directly instead of just promoting economic development) but in general the sorts of things countries should do in order to develop and the sorts of things after they've developed need not be the same.Delete
An interesting post, as usual!ReplyDelete
In the 1980s I was involved in so-called Euroloans into Latin America. The Brazilians were always very earnest about how they used the borrowed money but the Mexicans were more cavalier. It seemed as if every loan just led Pemex to stick another few floors onto its headquarters building in Mexico City! Basically they were expecting the oil to make everyone rich, without having to try very hard.
It took a long time for them to shake that idea, but what's happening now is very heartening. Now if they could just get America's drug wars off their streets...
Noah, I think your data is wrong.ReplyDelete
I went to the source and it said Brazil PPP ajusted GDP per capita growth was over 10% in 2011! Our real GDP growth figure was less than 1%. Not ideia how they get theses numbers, but I think part of the problem is that they use PPP ajusted GDP in current international $, not constante international $.
In the world bank, using "GDP per capita, PPP (constant 2005 international $)" mexican anual growth since 2003, when latin america accelerates is 1,21%. 3,2% for Brazil.
And since the 80's it's 0,73% for mexico and 0,99% for Brazil.
Since 09 mexico have a 3,45% anual growth, but they are still below 08.
So I think Mexico is not up for developed yet.
It was an inflation-adjustment thing. See the update I posted!Delete
Also mexican/US "GDP per capita, PPP (constant 2005 international $)" is 40% in 1980; 29% in 2003 and 30% in 2011.ReplyDelete
In Brazil the numbers are 30% in 1980; 20% in 2003 and 24% in 2011
Manufacturing - export is a path to economic development because:ReplyDelete
1) it does not challenge vested local interests (it does an end run around them);
2) manufactured goods can be shipped whereas services cannot;
3) a new manufacturer can produce goods where someone else (offshore) has done the product design, financing, marketing and distribution (Foxconn in China is a classic example of this);
4) a new manufacturer does not need there to be a domestic market for its products so even a country with no consumer institutions (distribution warehouses, stores, malls, consumer credit, a consuming middle class) can produce and export consumer goods.
Basically a manufacturer like Foxconn has to get its products into a container and to tidewater. The economy all around it in China could be in the middle ages and it would not matter.
What's the evidence for rule of law? It seems to me excessive rule of law can get in the way of making stuff, eg. work-to-rule: http://en.wikipedia.org/wiki/Work-to-ruleReplyDelete
"What's the evidence for rule of law? It seems to me excessive rule of law can get in the way of making stuff, eg. work-to-rule: http://en.wikipedia.org/wiki/Work-to-rule"Delete
Another way to put it is that a society can be bound up by law, or trashed by a lack of law. You're thinking binary, I believe.
I guess I'm a bit biased against the economic genre I think of as "rule of law and blah blah blah" - when asked to explain wealth & poverty, list a bunch of virtues to adopt and vices to avoid, in a somewhat careless and imprecise manner.Delete
I think work-to-rule is a lousy example to illustrate your point, which is rather vague. From your source: "Sometimes work-to-rule can be considered by employers as malicious compliance as they pursue legal action against workers." So it cuts both ways. Work-to-rule is nothing more than two parties exercising their rights under a contract under which they've both agreed to the terms (albeit often under duress). However, enforcement of that contract is subject to rule-of-law. And that's where things can go seriously off the rails, as it has here in the U.S., where it's been relegated to a quaint notion of the past--dead since Bush v Gore, FISA reform, Guantanamo, and Citizens United. Maybe our new wealth model to replace "land theft" is "Wall Street theft," "Speech=Money," and "Corporations are People." Whether that model is sustainable remains to be seen, but I doubt it.Delete
Noah: " first Japan got rich, then Korea and Taiwan, now China, tomorrow maybe Vietnam. Yes, it's crappy to languish in the queue while the fast movers finish their economic miracles...but the good news is, the more rich countries there are, the more can industrialize at the same time.ReplyDelete
So who gets to hop on the development train first? Education, health, urbanization, functioning government, and "inclusive institutions" definitely seem to all play a role, but proximity to a rich country seems to really help. Which is almost certainly why Mexico is the first of the Latin American countries to take off into full industrialization mode - if that is what is truly happening there."
BTW, Japan was industrialized long before Taiwan, it just had to rebuild after WWII. And the rebuilding was (IMHO) helped quite a bit by the USA, as a deliberate building of a barrier against Communism (and that'd be after the accidental jump-restart that the Korean War gave Japan).
Yep. We gave them steady reliable deep markets for their (manufacturing) exports, and this gave their capitalists the confidence to invest a lot, enabling rapid growth. That's the typical story, and I basically buy it.Delete
Does that really describe American industrialization? It took a long time for American manufacturing exports to really surpass cotton and other natural resource/agro exports, and the US was well into industrializing by then.ReplyDelete
I've been reading Charles Morris's The Dawn of Innovation. It sounds like the US industrialization was more like "Add British capital investment and stolen British technology re-purposed and developed to mass production to an environment that was poor on free labor and capital but rich in natural resources, had unusually high levels of education for the time period, and a highly competitive domestic market - voila!".* There may have been an element of that in Korea and Japan as well, since some of their premier industries (steel and cars) were where they figured out a new market area, new production techniques, etc.
* Incidentally, I wonder if this hurt Mexico's economy during ISI. If it was just tariffs and import barriers, they might have still been able to grow even faster because US companies and investors would just invest directly into Mexican businesses (or form subsidiaries, like Coca Cola), and internal competition in Mexico's reasonably large - for Latin America - internal market might have kept things somewhat efficient.
Side-note, but Mexico reminds me that your pro-market institutions usually just have to be good enough, not fantastic. After all, Italy industrialized quite well, even though southern Italy was an agrarian sinkhole for decades, the mafia was all over the place, and Italian justice was a joke (what I've heard from Italians in the latter case).
Sorry, didn't finish. ". . . . internal market might have kept things more efficient. But instead, Mexico's internal market was carved up into cartels and public enterprises."Delete
Well, the cotton-exporting parts of America remained persistently poorer than the rest of the country, where they remain to this day. Since the United States is a big country which has had very serious regional divisions, it might make more sense to look at the country regionally instead of as one unit. (Although I don't have a concrete sense of how the North's export numbers would have broken down per se, since the North still grew plenty of crops too.)Delete
“How did South Korea pull off that trick?”ReplyDelete
Check out South Korea in this absolutely stunning graph – and the United States after a devastating generation of Republican dominance:
Germany is in the bottom 1/3 of that list, Russia is near the top. The US is still way ahead of the OECD average. Simply increasing the number of college grads doesn't seem to correlate well with workforce competitiveness.Delete
Countries would be wise, however, to embrace Germany's long tradition of industrial apprenticeships:
"Mexico and other Latin American countries couldn't pull off the trick of getting rich."
What about Chile? They led Latin America in income for a while (now about even with Mexico, but w/o the latter's geographical advantage).
Scoring well on rankings like these seems to help:
Interesting article on ex-communist countries: "Trade makes you rich—but reform at home is what causes it"
Mexico and other Latin American countries couldn't pull off the trick of getting rich.ReplyDelete
Between 1870 and 1930 Argentina was well on track to getting rich and then seems to have thrown it away in a series of bad political decisions and cronyism that continue to plague the country to this day.
Rampant political instability was probably their biggest problem, with cycling coups, military regimes, and democratic restorations. You can see the same thing with Mexico, and how things started to get drastically better once they had a long period of relative political and economic stability (the "Mexican Miracle" from the late 1940s to the 1960s).Delete
"Political instability" in South America was often due to foreign interference. In Mexico, it was mostly homegrown instability from what I can tell (though it was certainly the leftovers of the caste system from the Spanish conquest).Delete
Further south there was an *awful lot* of foreign interference. Often the US but sometimes neighboring local South American countries.
The Irony is that Latin America is in general much closer to middle income than poor. I think manufacturing is an important step and the ability to tap foreign markets means you don't need to develop domestic ones immediately alongside manufacturing growth. The real development is agricultural workers become factory workers, this leaves you middle income, then factory workers become knowledge/service workers.ReplyDelete
Just as I was about to praise you for a well-thought out post, I got to this part:ReplyDelete
"(This doesn't mean I think that the Right has it right in Latin American countries..."
You just described what has worked for Mexico, South Korea, who cares if some successful policies enacted would be supported by "bad guys" (the "right").
I think we get farther by being more pragmatic about what works for development and what does not.
You just described what has worked for Mexico, South Korea, who cares if some successful policies enacted would be supported by "bad guys" (the "right").Delete
Just as I was about to praise you for a well-thought out post,
It's OK, praise makes me feel uncomfortable.
lol to the Tom Friedman comment. And this is particularly insightful, and deserves repeating: "Now, I don't want to get too down on people who believe that narrative, because that really was the way the world worked for many thousands of years. Almost all economy was farming, logging, mining, fishing, etc. The only capital was land, and land was fixed. Grab the land, and you grab the wealth. A zero-sum game where kings ruled and slaves starved."ReplyDelete
I believe there is quite a bit of cultural hangover from this situation -- it exists in minor proportion materially these days, but it's sort of embedded in people's feelings about wealth and power
And in plenty of countries today, something similar is still true. In countries suffering from the "resource curse", most of the income comes from oil drilling, or mining, or farming, or logging - in other words, from land. The people who own the land get fabulously rich, and the poor people languish in poverty, with little to do but open little shops and stalls in the slums, or work the mega-farms of the land barons.ReplyDelete
Canada is a partial exception for several reasons. Canada always had too much land and too few people (it still does). That limited the power of land owners. If the "Family Compact" got too oppressive in Ontario there was wilderness just a hundred miles away that could be cleared and farmed.
Proximity to the US was another factor. If conditions got too onerous in Canada it was a short trip to get into the United States and that gave poor people another exit (a lot of French Canadians from Quebec went to New England to work in textile mills.)
The big resource advantage of Canada came with oil after the Second World War - that is after Canada had industrialized. When oil prices are high there are huge internal stresses in Canada - the dollar goes up, Alberta booms, and manufacturing in Ontario and Quebec gets slaughtered - so Canada is suffering a version of the resource curse.
Same Anon here.Delete
Mexico is also close to the U.S, so that argument doesn't seem to hold. (And Canada was invaded by the U.S. and had territory chopped off too).
It's a myth that Canada has too much land. The reason is that the whole section from International Falls to Muskoka is simply uninhabitable. Same with Hope to Calgary (excluding a couple pockets). Can't grow crops on rock. While the U.S. has both latitude and longitude, Canada has a 4000 km strip 150 km wide. And the places that Canada is colder than includes Kiev, Buffalo, and Bangor.
I get that resources can be a curse, but that's not enough. Finding resources after industrialization doesn't matter, as you say (United States, Norway, Britain)? Making sure that Shell doesn't develop your resources is exceedingly important (Nigeria)? Kicking out the white devils helps (Saudi) or hurts (Iran)?
"manufacturing-export capitalism" where it has worked in the long haul has meant massive government intervention and high tariff walls. The only possible counterexample has been the UK, and they had a unique global empire. It is also part of a zero sum game since not every society can be a net manufacturing exporter. It actually has relatively little to do with capitalism if one actually looks at the internal mechanisms, and more to do with government directed development.ReplyDelete
The historical wages of exploitation are unimportant in explaining amassed advantage in the present time?ReplyDelete
And the "money makes us happier" point -- well, it seems having access to the necessities of life and some creature comforts and options makes us happier; beyond that point, it takes exponentially more to make us happier. The linked graph doesn't defy the Easterlin Paradox, it redefines it. Easterlin (and others) showed something like a saturating (Michaelis Menten) curve for wealth's effects on happiness. The linked graph makes this disappear by making the x-axis a log scale. So what they have "proved" is a kind of "both are right" -- money (or rather, what money can buy) makes us happier, but it takes exponentially more of it as we get more of it. In other words, it starts appearing to saturate. Even if it does not literally asymptote, something requiring exponentially more money to increase effectively requires either pouring disproportionately more and more resources into making the happiest happier, or maintaining some significant dedication to sharing (redistribution to) the lowest in order to bring them into the medium/high range.
In a resource limited (i.e., the real) world, these choices become zero sum sooner or later (I'd argue sooner).
Also, I don't love the "rising tide" metaphor. A rising tide, after all, lifts all boats because you can't pile water-- every increase is exactly equally distributed to all points on a plane. (Even if one posits different "depths" -- starting wealth -- each depth benefits proportionate to the whole, not to their starting depth, such that as n --> (large numbers) the depth of water over all points --> parity. That is, something unlike most economies in practice.)
"The historical wages of exploitation are unimportant in explaining amassed advantage in the present time?"ReplyDelete
Yes. McCloskey explains:
"What made the modern world was the gigantic size of the entirely
unprecedented spoils of innovation in product and process and
organization, together with an egalitarian distribution of the spoils in the long run driven by entry and competition. The inventor Richard Roberts, true, was directly employed by English cotton-textile manufacturers to produce a device to break the labor power of the mule spinners. But most inventions achieved their profitability — as indeed the self-actor also did — by making costs lower for a given output, not by exploiting the workers (whether or not along the way the workers did get exploited). Exploiting the workers, to repeat, does not yield enough loot to explain rises of 100 percent, not to speak of 1500 percent, in the productivity of all — including paradoxically the exploited workers themselves.
(...)This, to repeat, is not to say that there was no exploitation — that British or Belgian or French or Spanish or Portuguese imperialism was good news for the people imperialized."
So all it takes for the poor to get richer is for them to make the workers in the rich countries poorer. How convenient for you that you are nice and safe in a tenured position, wont have to worry about some Mexican economist making you obsolete at 1/10th the salary.ReplyDelete
So all it takes for the poor to get richer is for them to make the workers in the rich countries poorer.Delete
So you subscribe to the "lump of wealth" fallacy too? Only you'd rather take from the poor people instead of having them take from you...
I guess if South Korea had never gotten rich, we'd be in happy land now?
The College should assist you during your college period, which includes Library, Internet, intranet, hostels, seminar halls, dispensary, student clubs, gym etc.ReplyDelete
Placements of a college depend upon many factor like infrastructure, faculty, facilities provided, Rank of the college, past performance of the students in company
Apart from this, the college should have extra-curricular activities such as indoor and outdoor games and cultural programming’s. Top Placement Engineering Colleges In Tamilnadu
"Of course, "manufacturing-export capitalism" has eventual costs. When growth slows and the economy shifts toward services,..."ReplyDelete
then you may get disaster.
You'll note that the US no longer does manufacturing-export capitalism. What has been the result?
The 1% has seized the government, abrogated the rule of law, *destroyed our manufacturing* so that we can't do manufacturing-export capitalism any more (offshoring all of it), allowed the infrastructure to crumble, increased poverty, made the Gini coefficient worse...
There's a serious problem here. The manufacturing-export stage is great and all, but it seems that the "natural" next stage is an unmitigated disaster.
There's the corruption of Japan, nuking themselves with Fukushima. (Though at least they don't have the '1%' problem.)
The similar events leading to the collapse of the USSR (formerly a manufacturing-export power, and don't forget it). And they do have the 1% problem.
We're likely to see the same damn thing here in the US.
Is there an alternative? The social democracies of Scandanavia seem to provide a possibility. Maybe. They're all very small. A focus on equality (keep that Gini coefficient down) and local sustainability (keep that manufacturing local) seem to be crucial.