Good chunk of post-Soviet countries adopted free market policies and most of them failed, so I do not agree that there were only a handful of 'free-market' developing countries. Also countries adopt 'free-market' policies often as the condition of getting IMF loans, so the list of such countries might be much higher.
But what about the Middle Eastern countries who tried very similar policies in the 60s and 70s, and it didn't help them at all?
You can't just pick successful countries who all have X in common and write a Just-So story about how X is the cause. You have to look at all countries with X.
I found "Egypt on the Brink: From the Rise of Nasser to the Fall of Mubarak" useful as a source on Egypt specifically, though it's more political history than it is economic.
I feel like most Middle Eastern countries were not stable enough to keep the policies going. The most prominent example of socialist country trying to turn things around is probably Egypt. Egypt started with something similar in 1956 with Nasser, but by 1970s they were already deregulating their economy since they switch their side in Cold War.
Don't most of the Arab countries still have a hereditary nobility of large landowners? And haven't they stayed focused on bananas, rather than manufacturing? (Well, oil, but it's the same sort of thing as bananas. Some of the Emirates have tried to do something different, I suppose.)
Read Elinor Ostrom's book "Governing the Commons". There's lots of interesting stuff in here about how various traditional societies figured out non-state non-market ways of solving common pool goods problems, including water rights among small landholders in Spain, that involved a complicated system of ditch maintenance that made it easily verifiable by everyone that everyone was doing their part fairly.
And yet after the irrigation system was destroyed by the mongols, it was never rebuilt. Kinda hard to square that with some sort of cultural genius for hydrology.
?? The article describes the use of the irrigation system in the US. I'm unaware of any Mongol invasion of the US — and the origin was Spain, and I don't believe the Mongols got that far. Could you clarify wrt to the article to which I linked?
I’m no expert, but didn’t Israel follow broadly similar policies to Korea, Taiwan etc and also succeed? My sense is that even (relatively) peaceful Turkey, Jordan etc have not been able to follow a similar path.
I wouldn't say that Israel followed a similar model: The early Kibbutzim were not privately owned, though being small and communal may have led to similar effects.
But Israel is something of a special case, having been built by immigrants. The earliest migrants were largely Eastern Europeans: Not quite American/British, but not Chinese either. There was also non-negligible immigration from Germany and either highly developed-European countries before WWII, and they would have brought substantial knowledge with them. That probably also explains at least part of the socioeconomic gap between European Jews and Middle Eastern and North African Jews and Arabs in Israel.
It's interesting that the most recent immigrant wave, of roughly one million often highly-educated immigrants from the USSR around 1990, actually had pretty low socioeconomic status, though it has since gone up. That may just reflect Israel's relatively high development by 1990 (to Soviet levels? IDK) plus some difficulty integrating.
There's an econ paper analyzing the labor market impacts of the Soviet Aliyah. Let me know if you can't find it in Google Scholar and I'll dig it up.
I wouldn't say the USSR jews were low socio economic status, they were only low economic status in Israel because of frictions entering the labor market (language, specializations). They were high socio status (education, culture) and indeed this shows in the catch up a generation later.
The counterexample I was thinking of was India, which implemented protective tariffs, manufactured their own crappy cars etc., and grew slower than Studwell's failure stories. At least in the Economist magazine version, the tech industry took off because the central planners didn't quite know what it was and left it alone, and India only achieved sustained fast growth post-liberalization.
Basically two, Ambassador and PAL, with the Suzuki-licensed Maruti introduced in the 80s. The argument would be that India did not enforce export discipline, and the “license Raj” bred complacency.
Automobiles have been liberalized since, and their first passenger car was only in 1988. Tata used to make trucks, but not cars. They started making the Nano, but it's not a big success AFAIK.
To what extent did their similar policies include real internal competition and export discipline, rather than the government subsidizing and/or owning designated champions of industry? My admittedly vague impression was that Nasser et al were Soviet-influenced socialists and much more friendly to SOEs than to entrepreneurs.
The Middle East experienced the highest increase in the UN Human Development index at the time. Sure, oil wealth helped (although it also causes Dutch disease).
Isn't the Dutch disease thing largely a myth? If you have 2 countries, one with $10bn of GDP and the other with $20bn, but $10bn is from commodities. Then if the non commodity part of the economy grows 7%, overall growth is only 3.5%. And for the country with no commodities, it would be 7%. Even though rate of development is the same.
The idea is that commodities represent easy money, which drives out every other kind of investment. At the same time, commodity prices can be rather volatile, to put it mildly, especially if you are not the margin producer.
I don't see why it would drive out other kind of investment. I think the risk is more that leaders can get rich from stealing those commodities, and use to resources to live large and opress the population. Whereas with no commodities they are forced to develop, opening Pandora's box (in a good way).
But for the most part, the non commodity economy often grows just as fast, it is just that the commodity part of the income distorts the growth %'s.
As I understand it, the reason commodity investment drives out other investment is because the risk-weightes return is so much higher.
The other problem is that the risk doesn't go away, and is in fact quite severe and hard to diversify or hedge away, at least on a national scale. In other words, you're always at the mercy of oil prices.
A different version might be Africa where a variety of countries (most recently supposedly Zimbabwe in, say, the late 90s by appropriation, and still, to now, supposedly South Africa by buy and split white farmer land) have claimed to do this.
I’m unaware of any success stories. Did every one of these devolve into cronyism?
I read this in a French paper encyclopedia in the 90s, can’t remember which one, probably the Universalis annual supplemental volume, and in any case it would have been discontinued years ago.
Not sure about the details but I remember an Iraqi writing that Saddam Hussein was actually a pretty competent administrator when he was Vice-President before he staged his coup and power went to his head. Iraq certainly had the human capital: engineers, doctors and so on, not being burdened by the dead weight of Wahhabi indoctrination in schools.
Iraq's lack of human capital is one reason why Greg Cochran was confident they wouldn't have any nukes. Other reasons were sanctions & that chunks of the country were too hostile to the regime to contribute.
Most of those factors would also apply to North Korea, yet they managed to get nukes. It's a 1940s technology, well within the reach of most nation-states. It's only active measures to deny enrichment like those under the NPT that have prevented more widespread adoption of nukes by every tinpot dictator out there.
I think the frameowork of exisiting within a Theocracy is enough to outweigh all of the other changes. I mean it looks like many of those Middle Eastern countries were indeed in somewhat of a renaissance before religious factions came in and reorganized the entire game around a very different incentive structure that had little to do with maximizing economic growth.
And I think the author would claim that the set of circumstances he describes are situationally dependant semi-necessary but not sufficient.
>These countries started with nothing. In 1950, South Korea and Taiwan were poorer than Honduras or the Congo. But they managed to break into the ranks of the First World even while dozens of similar countries stayed poor. Why?
The real reason is that they got drowned in American/Western investment for geopolitical purposes. Its as simple as that really. I find that you always seem to assume that a country's successes or failures are dependent on internal factors as opposed to external. Its a bad habit you have.
Warning that you keep doing this thing where you keep being vaguely condescending to me for not realizing X, then not giving any evidence that X is true. If you keep doing this I will ban you.
This appears to be a 1965 article with no comparisons of American investment in Taiwan to American investments in Congo, Honduras, or anywhere else in Africa or the Americas, so I'm not sure that it supports your claim that the *difference* between these places is explained by a *difference* in American investment.
I'm just going to reiterate what Kenny is saying here - what you link to doesn't really support your thesis in the large. Plus, just linking to a JSTOR article without context comes off as moderately unhelpful. Personally - and I imagine this feeling is shared - I'm disinclined to go through the work of reading through random paywalled articles because there's a good chance it's a waste of time.
Also, just in general, making generalizations about people "I find that you always..." is really pretty unhelpful communication. Do you know this to be literally true? Take the second persian gulf war: do you think Scott blames internal factors in Iraq for the fallout from the second persian gulf war? My money's on Scott putting substantial responsibility on the military campaign and occupation. Even if he's like, fuck no, it was all the Iraqis fault for not having backup water treatment facilities, well, okay, then he's crazy. We just don't have enough information to know what Scott always does or doesn't do.
If you find yourself asserting generalizations about other people's beliefs that aren't literally true, then you're probably doing something wrong and should reevaluate strategies.
Unrelatedly, are you Chris Allen of haskell land? Think I had a pleasant dinner with you at lambda conf one year. Hope you're well.
"Since rich country economists kept leading everyone astray, the only countries that developed properly were weird nationalist dictatorships and communist states that ignored the Western establishment out of spite."
Here you are making an assumption that communists are acting out of "spite". This is very uncharitable. Actually communists have a very good understanding of the economy and the goals they wish to achieve. I would suggest that you read some of Marx's work on this subject such as Capital Vol. 1
I'll admit that I probably like Scott more than you do, but that read pretty clearly as tongue in cheek to me. "Leaders gave bad advice so the people ignoring the advice clearly were doing it out of spite" strikes me as a reasonably witty way to poke fun at the bad advice given and the success of the people who didn't follow it.
It's not about "liking" Scott, it's about looking at his history of being able to analyse politics. We've seen previously that any political ideology that doesn't confirm to his ingroup seems to be beyond his understanding. Instead of charitably engaging with the outgroup he jumps to accusing them of "spite".
You can say this is "tongue-in-cheek" - but tongue-in-cheek in service of what? What follows is not an actual analysis of communist political analysis and goals.
Communist regimes don't act out of spite, though. It's weird that Scott would write this, especially since Rationalists typically try to be charitable to the outgroup.
Would it not be correct to say those countries general world views suggested that those rich economists were basically self interested jerks or active facillitators of imperialist capitalism, so would not spite be a correct motivation as to why they were ignoring them?
I am absolutely certainly not going to say that Chris Allen is right about anything, but you do seem to have a habit of adopting the first plausible seeming explanation of anything as The Real Truth and then turning around making a blog post about it. That can be a bit disappointing to see.
Also, sometimes foreign investment really did spark entire industries. RCA in Taiwan. Singer, too. Then the plant employees start copycat firms, or small parts firms, etc. But that foreign investment did matter.
This seems implausible. What geopolitical purposes were served by investing in East Asia rather than the Middle East? Even Latin America, Subsaharan Africa, and South Asia were also parts of the "third world" that the first and second world were fighting over for allegiance during the Cold War, but the Middle East was just as much the front lines as East Asia, and had the additional presence of a geopolitically important resource.
WWII also wreaked hella devastation on the Philippines, and the Philippines are much better positioned to cut off routes into or out of Mainland China.
A big difference in postwar land reform in the Japan vs. the Philippines was due to the fact that the rich in Japan were the enemies of the U.S. in 1941-1945, while the rich in the Philippines were our heroic friends fighting our mutual enemy the Japanese behind enemy lines. So, expropriating the Japanese ruling class seemed a much more morally fitting policy to Americans than expropriating the Filipino ruling class, who had just gone through four years of occupation.
South Sakhalin was seized by the USSR after WWII (and Manchuria/Korea were removed from Japan's control), so I'm not seeing where the USSR had a land border with postwar Japan.
Given the giant US built port at Dharhan, the giant US built airbases at King Khalid, and the giant US built oil pipelines crisscrossing Saudi Arabia, I think you underestimate what Aramco was up to.
What Aramco was not up to was a large scale rewrite of society ala MacArthur or Mao.
Another interesting case is Iran, which seemed (by numbers and cultural indicators) to be one of these success cases under Mosaddegh, who pushed the British out of ownership positions and passed a land reform act, until the 1953 coup, when the west installed the newly empowered Shah, who proceeded to run western friendly policies.
His policies were "western-friendly" in that he opposed the communists, but my recollection is that they were also quite pro-development and included land reform.
Iran bordered the Soviet Union and was in the US sphere until 1979. Pakistan was in the US sphere, borders China, and only 10 miles of Afghanistan separated it from the Soviet Union. This chain (Turkey-Iran-Pakistan) was extremely strategically important because it kept the Soviet Union from having access to the Indian Ocean.
The claim that started this subchain was that US strategic interests rather than the Asian development model are the cause of east Asian succes.
The fact that these other countries which are also of great strategic importance to the US didnt become rich is strong evidence against this claim. The lack if the Asian development model even more so.
This is the nobody-has-agency-because-cia theory of FP.
The US isn’t responsible for any of it in SK. For a decade after the Korean War it was a complete shit show. It wasn’t until Park took over and while the US may have supported him (as they supported his predecesors), it wasn’t as though the cia parachuted in a bunch of marxist land reform economists to tell him what to do.
We were all over the Honduras at the time, and as always, we let their local rich run their show. As they would have without us.
I don't know where you got the many multiples of GDP for many years in a row claim from - it's not even in the post you linked to - but it is false. SK nominal GDP grew exponentially from some $3B in 1960 to $9B in 1970 and $67B in 1979 (https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=1979&locations=KR&start=1960&end=1979). The total nominal aid (ODA + OOF) to SK can be fetched from the OECD stats database (https://stats.oecd.org/Index.aspx?DataSetCode=Table2A#). It averaged $200M/y in 1960-1967, $500M/y in 1968-1974, and $1B from 1975 to 1982, then fell off to zero over the following couple of years. Note that this sum includes loans as well as grants. While I don't know how to fish this data out of the OECD website, Figure 4 in https://cdn.odi.org/media/documents/191203_republic_of_korea.pdf says that loans predominated after 1969. I.e. total aid (grants plus loans) never exceeded 10% of the GDP over this period. I should also remark that SK had to spend quite a lot of money on the military rather than on building its economy. World Bank data (https://data.worldbank.org/indicator/MS.MIL.XPND.CD?end=1979&locations=KR&start=1960&end=1979) shows that military expenditures amounted to about 2/3 of the foreign aid over this period. While this spending might not have been a total loss for the Korean economy, it is quite implausible that it could not have been invested more profitably elsewhere.
Also pure cope. Singapore was poor as dirt when it first broke with Malaysia and completely eschewed outside aid. Yes, foreign businesses *invested* in the country over time, but that's because of its strong rule of law and human capital - they could reasonably assume a return on invested capital.
Singapore was poor but not as dirt. At independence it was already 1.5 times richer than Malaysia - relatively rich by developing nation standards. It's now three times richer. Also Singapore didn't exactly eschew outside aid - LKY kept flying commercial to international meetings to keep appearances up to keep receiving aid. They eventually caught on and stopped sending aid.
I think you could fairly easily make the case that China would be far richer if it had more proper rule of law (see Taiwan as a nice counterfactual).
Was Pinochet's Chile known for weak business law? I thougth just the opposite? People need to be sure their capital won't be randomly taken by the state in order to invest.
The Chinese economy is growing faster than any economy in history and will outpace the US eventually. I don't think the Western model is one that they should follow considering its causing stagnation in the West.
Meh - a lot of that is catch-up growth which is what happens when you have a country with very high human capital that's been held back economically by a planned economy. Let's see if they can keep it going once they get to Western GDP per capita. I highly doubt it and would be willing to wager if someone wanted to take the other side.
China's rise began under the planned economy of Mao and you could argue Post-Deng China is still in a more moderate sense a planned economy given the interventionist and guiding role the CCP plays. China's economic model is not just a copy and paste of Western neoliberalism
The U.S. was actually quite protectionist against Japan, and mostly held it back (relative to the very similar Italy) rather than driving its economy forward.
I beat up on American foreign policy as much as the next feline, but I am pretty sure that for much of its history, South Korea did not allow foreign investment.
>Unfortunately, most countries practice bad economic policy, partly because the IMF / World Bank / rich country economic advisors got things really wrong.
Scott you are so close to an important realisation. This is not a bug, it's a feature. The IMF/World Bank and all these other Western-centered/founded organizations are designed this way. The purpose is to keep the Third World in the dirt at the West's benefit. Its modern-day neo-colonialism.
What is the benefit to us of keeping Africa poor? Don't we get lots of benefits from trading with and offshoring too South East Asia, the area the conspiracy chose not to keep poor.
So the intention is not to keep Africa poor. The intention is to keep the markets of Asia and Africa open for US products. In some countries, this thwarted growth and led to poverty
Surely they'd be able to buy more U.S. products if they weren't poor? The U.S. isn't where you go to manufacture cheap-as-possible consumer goods that market to the poor.
Yes but the world bank doesn't know that keeping the markets open for American products would keep these countries poor. This is a fairly new hypothesis that is proposed in this book, and I'd argue that it's majorly flawed (although it offers some interesting insight)
This assumes "products" is just an interchangable category. Countries do not make Units Of Generic Universally Exchangeable Product and comparative advantage is a thing.
Africa will have 4 billion people by 2100. Nigeria alone is projected to have 800 million people - more people than all of North America. If their GDP/caps went up, where would the US and EU be?
If their wealth went up that much they would start to produce those things themselves, and meanwhile the prices of bananas are going through the roof. It turns out you now have to pay your banana farmers $15/hr wage.
Nevermind the geopolitical position of the United States. China already produces an increasing anxiety among westerners as is. This could be China x5
There's an enormous gap between the current development level in Africa and being able to make their own high end tech goods. And they will be more profitable to the US as they get wealthier at least until they reach that point.
To make it concrete: if you triple the GDP of Nigeria, you'll get a big increase in the market for Avenger's movies, and zero increase in supply.
The same will hold true for cars, software, and pretty much any luxury or high-tech good you care to name.
It's far-fetched that all the elites in the west are coordinating against their own short and medium term interests in order to avert a possible super-long-term issue where Nigeria mostly catches up to us in development. People don't coordinate that well.
Countries may not leap strait from coffee beans to avangers movies, but they can leap to other industires the US might want to keep domestic. I just read in this very reveiw that Cars seem to be the first line of attack for many of these prospective wealthy nations.
I also dont think there is much of an coordination going on here, just individual countries acting in self interest.
Britain had a policy of disallowing advanced industries in India during colonial times. It does not seem farfetched to me that the'd aspire to continue to persue that same objective in the present.
Yes, on an emissions front you are correct. Unfortunately the focus on global warming has obfuscated somewhat the myriad of ways that are not directly tied to CO2 emissions that human beings devastate their environments.
We know development dramatically reduces birth rates. This is the #1 way that development will result in less environmental desctruction.
Poaching and deforestation are best protected by strong institutions/rule of law. Poorer countries with rapid demographic expansion struggle to maintain these.
Look at the end of the day the question you have to ask yourself on this point is: (1) are you going to use violence and force to prevent development and maintain huge populations in pre-industrial lives or (2) are you going to invest and work with them to accelerate them more rapidly through the most damaging environmental phases of development and to a more sustainable future.
#2 we haven't really proven can be done yet, but I'm optimistic that as alternative energy sources develop we will enable today's 3rd world countries to "leap frog" over some middle stages in the same way they were able to with mobile phones.
I find some people here tend to overvalue free trade. There is a lot more complexity to the global world, free trade isn't a positive thing a priori.
Also like, it's not a 'conspiracy', this is just the natural tendency of world leaders in developed nations. It's only a conspiracy if they're intentionally working together, but they don't even have to, it's just kind of obvious and in their best interest to keep small nations neo-colonised.
If you're the powerful one you can dictate the terms of free trade agreements and you can send your companies in to pillage the wealth.
If they thought it was not in their best interest then why don't they lift Africa out of poverty? Their aid is pauper and intended for the purposes of debt-trap diplomacy.
I don't think there's a magic button that would lift Africa out of poverty. The world overall would surely be better off if Africa even had Latin American levels of GDP per capita. That would be highly beneficial to Western economies since it would mean more trading partners. There's no secret conspiracy to keep Africa poor.
The essence of free trade agreements is that neither party can dictate the terms. Or, alternately, that both parties can - but the trade doesn't happen unless both parties agree to it. So you need an explanation as to why the African parties to this trade are agreeing to deals meant to pillage their wealth.
Mostly because the people that negotiate the contracts benefit from the agreements. That does not mean that the country itself benefits. It's the same in the East Asian countries that are mentioned as failures. Thailand may not have the growth of South Korea, but King Vajiralongkorn sure isn't suffering.
If somebody approaches you with a knife in an alleyway would you not do what they tell you to? Unequal power relationships often result in bad situations for the weak.
Hmmm what's strange here is American and European capitalists made more money than at any point in modern history..... capitalizing off the labor of countries that didn't listen to the "consensus" - China, Japan.
The number of billionaires and millionaires minted off communist china vs those minted off Africa is comical. These capitalists must be terrible at their global conspiracy.
I think you’re missing the individual incentives here. In the short run, foreign investors do better to keep commodities cheap and own more banana farms. Sure economic development might help investors in 30-50 years. But what incentive do today’s investors have to prioritize the profits of investors half a century from now over their profits today?
Socialism is the next logical step, but I don't think it's so surprising that it's developing in fits and starts. Capitalism's early years were very shaky too. I'm not sure why you would be so dismissive of socialism. Have you read Marx?
The single biggest way is farm subsidies and tariffs in the US and EU that prevent Africa from exploiting its comparative advantage. They don't benefit the US or EU globally since consumers who make up the bulk of the population pay higher prices, but they *do* benefit constituencies with disproportionate political power like farmers in rural states.
The UK realised that in the 1840s when it abolished the corn laws, and when I go shopping for groceries in the UK, I regularly see produce shipped from Kenya on the shelves. Maybe not great for the environment, but excellent for improving the lot of ordinary people in the cradle of humanity.
That's the right question to ask. And it comes down to the age-old concept of comparative advantage. What do rich developed countries want to export? The sort of know-how- and capital-intensive products and services that they have based their economies on. Ideally, export those for eye-gouging prices to countries that cannot make these products themselves.
What do rich developed countries want to import? Natural resources (which they consume/process out of proportion to their population size) and products that require lots of low-skill-labor. Ideally, very cheaply because loads of countries have nothing else to export.
In this sense it is in the interest for rich developed countries that the rest of the world keeps exporting lots of bananas and is not capable of making high-tech-stuff. Just as Scott mentioned that the "financial-hub-niche" is a good gig if you can get it, the "things-only-developed-countries-can-make-niche" is great too, especially if it doesn't get too crowded.
And there IS a lot of anxiety in developed countries about other countries catching up. See eg. all the hand-wringing (at least in Europe) about the threat of losing jobs to China, India or Eastern Europe (from the perspective of Western Europe).
Also the politicians who make such deals are often from a very different class and have different goals/interests compared to the population of the country as a whole.
You guys are the ones making the case that the influence of these organizations is nefarious; unless you think 3rd world governments are too short-sighted or ignorant to see the same things you're seeing and act on them, I don't know what to tell you.
Secondly, keep in mind these billions of dollars you're talking about are usually not gifts or grants; they're typically loans that have to be paid back. I don't know about you, but I get offers from people to loan me money all the damn time, either from credit card companies or banks, credit unions, or mortgage companies, and I have no problem saying no to these people every time.
I don't think loans to countries work like loans to individual people. By the time the loans are due, the politicians may be long out of office or even dead. You can call that "short-sighted", but political leaders have a lot of incentive to be "short-sighted".
That's true, but that goes for every form of borrowing, not just World Bank/IMF lending, and the temptation exists for any government with semi-predictable turnover. At least a few Asian countries managed to resist. What's everybody else's excuse?
I see, so when Raghuram Rajan was Chief Economist at the IMF back in the early 2000's, he was actually conspiring with the West to keep his fellow Indians poor? I suppose that's what Gita Gopinath is up to right this very moment, trying to impoverish her home state of Kerala.
There's no "conspiracy" here - most people just have a closer allegiance and ideological alignment with others of their class rather than others of their nation. This has been obvious to Marxists and others for a long time:
He believed he was doing the right thing. No conspiracy. "Here is some money, also open your market. Both will be good for you, but you need to take them together."
But if opening the markets in developing countries is actually poison, as this book contends, than this is a problem.
That's unlikely, and so you would need strong evidence to convince anyone. How does keeping your trading partners poor help you? They can't afford to buy your stuff that way.
Never attribute to malice that which can be adequately explained by stupidity.
I have never met anyone that believed their life's work was designed to harm others this gravely for their own personal benefit. Virtually every one believes they are the heroes of their own stories. I can't say that it's not possible that people go to work for the IMF and World Bank thinking about how to best exploit the third world, but is seems much less likely than them having good intentions, but being mistaken. Especially with how afraid they were of communists taking over the world. They'd want powerful allies, not weak ones.
>Never attribute to malice that which can be adequately explained by stupidity.
When said individuals are known to be malicious its fair to assume they are complying with their nature.
All you have to do is look at the West's history of colonialism and savagery in the 20th century right up until the present day where they murder Iraqis for oil and support the genocide in Yemen.
Let's look at incentives. Are the employees of IMF rewarded based on how the countries they advise prosper, or based on whether they recommend the "correct" (i.e. popular in the West) things?
Serious question; I have no knowledge about this, other than my priors.
Maybe part of the macro story is that the World Bank and the IMF are monopolies and thus insulated from the effects of their policies. What would it take for them to get some competition?
There are many development banks that compete with the World Bank. The IMF does a few things, but mainly aims to make loans to countries when no one else will. So sort of by definition there couldn't be competitors, or else the IMF just wouldn't make loans in that situation.
There is competition now, what with Belt and Road and AIIB getting into the game. Competition is good for development. One wonders why the West is so adamant that Chinese competition is malign...
I think a lot of people are willing to do the occasional salute to Mr. Xi if it means they get to eat dinner. You can protest that freedom is always more important than mere products, but realise you do so from the privelage of knowing that statistically none all of your children will make it into adulthood.
Also, hopefully western isntitutions will try to better their conditions to compete with chinese ones.
It's not good. China doesn't understand that what became colonialism was the aggregate of a bunch of practices that Europeans adopted to make money while abroad.
Instead, in China, and much of the formerly colonized world, colonialism is taught with the implication that Europeans got together in the 1500's and had a "Let's be evil and take over the world meeting." They didn't.
European governments and businesses seized power and territory abroad because it was profitable. They overthrew local rulers to protect revenue streams. They got special dispensation from local law to avoid interruptions for their money making.
None of this is uniquely evil, nor was it a centuries long conspiracy, rather it was just companies and people going from A to B to C because each jump made them money and they happened to have the technology and military power to back it up.
China is now investing abroad. China knows that they never had a "Let's be evil" meeting. So obviously they can't be doing anything colonial.
When Chinese businesses want to be exempted from local law in Djibouti... they are doing that for good reasons. Not for the evil reasons that saw foreigners get exempted from Chinese law in the 1800's.
China doesn't want to realize that many of the same incentives that caused Europeans to adopt colonial practices also apply to Chinese businesses.
It makes no diffrence to me wether China has had a "let's be evil" meeting, an "let's make money" meeting or even an "let's help out africa out of selfless kindness" meeting. What i care about is results.
If China is succesfull in lifting Africa out of poverty im cheering either way. The difference between Chinese neocolonialism and actual colonialism is twofold
1. Actual colonialism didnt contribute to the development of the colonies at all, and even reverted it. Precolonial Timbouctu had a long scolarly tradition, after a century of colonialism there were barely any university-educated people left at all.
2. Colonialism may have started with trade, it quickly turned into violent conquest. (will China start conquering africa? seems unlikely).
1) Timbuktu was in 400 years of decline before the French got there. And France had less than a century there.
Actual colonialism had a mixed generally negative record. That said, the people doing the colonizing generally justified themselves by saying they were bringing benefits to the poor inhabitants.
2) it generally took decades or even centuries for trade to turn to violent conquest. With the exception of the Spanish in the new world, most of colonial conquest had a long lag time. The east India company started in the 1500's and they didn't conquer anything until the late 1700s. France got Indochina only in 1885.
But the point is violence was on a list of options and it was chosen because it was profitable. What will China do if some Eritreans murder 67 Chinese workers? Are they really going to be principled non interventionists there?
It takes a country with a lot of cash and its own political interests to promote - I believe this is the role of Chinese loans to developing countries, especially in Africa.
A country can get loans from private investors, generally by issuing bonds. That's the default way of getting loans. Countries only turn to the IMF if they have already fscked up badly enough that private investors don't trust them to pay the loans back, so they are on the brink of a sovereign default. Which has happened quite often to poor countries.
I started, but didn't finish the book. My basic objection to it was that it felt to me as if it could have been purely cherry-picking. He's looking at 'the Asian countries that did well', which gives him six countries (Korea, Japan, China, Taiwan, Hong Kong, Singapore), and sometimes he talks about all of them, and sometimes he removes Hong Kong and Singapore (because city-states don't have the same problems as larger countries), and sometimes he removes China (because it started horrible and Maoist), and sometimes he removes Japan (because it was in the 19th century when things are different), and sometimes he removes all four of them and only talks about exactly two countries, and the result of this is I really can't tell if he's actually got a point about what works well, or if he's picking and choosing for the sake of the arguments he wants to make. This isn't the claim that he definitely is cherry-picking, but the much less confident statement that I can't prove this isn't really is the Elderly Hispanic Woman Effect in the field of economic history.
Market monetarist can sort-of honestly claim to have a grand theory without being billionaires. But that's because one of their main ideas is that markets are fairly efficient, so it's hard to second guess them to make more money.
They are usually less about development, and more about arguing that eg the central bank shouldn't have models to predict inflation, and instead just use market forecasts.
If no market forecasts exists for a particular measurement, they should sponsor a suitable market.
This is irrelevant to the book review, but I got an overwhelming feeling of deja vu from your name before realizing it's the name of one of my favorite villains in Rurouni Kenshiin. Been over a decade since I read it; perhaps it's time for a revisit...
Better to have cherries to pick than none. Which countries have moved from developing to developed in that space of time, without having been an entrepot city state, and used Washington consensus policies?
No comment! I couldn't quote the Washington Consensus policies without looking them up, and my historical knowledge does not cover 'all countries in the world.' This was a report that my (possibly oversensitive) Bullshit Detector was going off, not a full-scale alternate theory ready to set up for debate.
Would Chile count? I'm not too familiar with it's hisotircal details, but it's a higher GDP per capita than China or Vietnam and wasn't already developed like Japan nor a city state (which leaves only South Korea and Taiwan from the East Asia list).
They're the closest, I think. But I suspect that's because they were 1) ex communist and 2) European. Communism does do a lot of state directed investment, which doesn't have to be great to have a positive return if you're poor to start with. But it's lacking the market test that export directed investment has. Even so it can do catch up growth in a somewhat ok fashion. What I think happened with the post communist states is that the old regime invested a lot albeit inefficiently, and opening up enabled them to improve from that point on, similar to how Washington consensus type stuff must come into the Studwell model eventually.
Some of the post-communist EU countries (Poland, Czechia) would be good examples. The post-1989 Polish establishment was infamously supportive of free-market economic policies. For example, the "Balcerowicz plan", also known as "shock therapy", involved overnight conversion of a planned economy to a market one. Everyone knows this was tried in Russia and failed miserably, but few people remember it was tried in Poland, too, and Poland is now basically a first-world country, with the per-capita GDP of South Korea in 2005.
I think "ex-communist plus European" is not quite enough of an explanation for these countries' success, because Ukraine, Russia, and Moldavia share these characteristics, but emphatically not the success.
The starkly different trajectories of post-communist countries are generally a fascinating subject. I'm yet to come across a good discussion of it.
Yeah, Russia had a terrible transition. Devil in the details there. What's worse is that Chinese saw that and concluded political liberalisation is bad....
Both Russia and Poland converted quite fast to market economy, but in very different ways and the term “shock therapy” only applies to what the Poles did. Russia and the rest of the former USSR could not stop organized crime from subverting the reforms for their personal gain—if the leadership even tried that is.
Don't think so - rate of growth wasn't that quick. There are a lot of countries that are richer than China or Vietnam - the reason they're development successes is because they're moving up quick. And Japan post war wasn't rich, nor was it pre war, though it was much richer than prior to the Meiji reforms that implemented the Studwell formula.
I sure love the intro to this post! (I haven't finished reading it yet but am excited to.)
Meta: Is it useful to start a prominent TYPO THREAD in the comments if one doesn't exist? Answers I can imagine: (a) yes please, (b) no please for creating a new comment thread but if one already exists, go ahead and add to it, (c) better to email them or post them to ____.
Non-meta: Typo at "These was nothing predetermined about this"
Not exactly a typo, but perhaps a point to revise - the quote about the land reform charity is in the review twice. snippet: "The leading NGO promoting land reform, US-based Landesa"
> Also, is it just a coincidence that Chinese / East Asian people in Malaysia and Singapore (and now the US) are known for being especially smart, rich, and good with money?
It's not a coincidence, but the reason is pretty simple: there are a lot of people in China and the ones who immigrated were the ones who had the resources and education to go. The ones who came to the US were the ones who were able to get to a port and pay for a ticket. Similarly the Chinese people in Malaysia and Singapore were often there running businesses or working in industrial sites that the British set up.
In both cases you're comparing the cream of the crop of a large ethnic group to the local people, so the result is going to be biased.
In any case, given that Malaysia did have a large local pool of ethnic Chinese businessmen, while Korea didn't, it would be strange for someone to think that the influence of Chinese economic ideas was relevant to why Korea succeeded and Malaysia didn't.
The monoculture aspect seems important, as it was present in all of the success stories (or in China's case the dominant culture). Of course, the Western mainstream still has multiculturalism and diversity as undisputable Big Good, so open acceptance of the importance of this point is out of the question for now.
Singapore is the opposite of a monoculture - it's far more ethnically, religiously, and linguistically diverse than any Western country. (But maybe this is relevant for becoming a financial and tech hub rather than an agriculture and manufacturing one?)
Singapore is a success because they let in diverse people and let them do their thing. Same with Shanghai and Hong Kong. (These were cities that the British built)
There's a great article over on acoup.blogspot.com which talks about how Rome was successful in the Republic period because it was astoundingly diverse and had much more lenient citizenship laws than most of its neighboring city states. Rome didn't care about your language or your religion. Instead, they punched you in the face and said, "I have beaten you, we are now friends, let's go beat someone else together" Essentially, Rome wasn't limited to one city and was able to draw upon the military resources of most of Italy, because they really didn't care as long your city sent troops to join Roman wars.
Yeah this felt like a forced "intelligence is hereditary" argument to me as well. However, it is pretty simplistic to assume that only the smartest and hardworking people from China (and India) immigrate to other countries. I'd imagine Chinese immigrants to places like Malaysia and Singapore would have been people looking for better opportunities after having failed in China, as both of those countries were very poor when this immigration happened.
In my opinion, in countries as old as China, Moloch would essentially prevent you from progressing very far, regardless of your talent and ambition. This of course is not a factor for newer countries like Singapore (and the United States a couple of hundred years back, in which people with talent and ambition could succeed
I imagine that it's really more of both a low pass and a high pass filter. The top talent and wealthiest stay behind in China because they don't need to migrate while the poorest and least educated people don't even have the resources to migrate. I'd also guess that in a subsistence economy many people are stuck in that latter category, so the people who migrate would often come from a relatively privileged background but can't progress any further because of Moloch.
Admittedly there are a lot of guesses going into my theory, but I think the general gist is right.
I think this is possibly an unhelpful simplification. The high pass filter doesn't apply to talent. For instance, basically most of the world's top talent wants to immigrate to the US for better pay and living conditions. The low pass filter should be really, really low. Scott talked about desolate Jews with criminal histories migrating to the US. We also see something like that today in some places.
Most Jews immigrated to the US prior to 1924 and the onset of much more restrictive immigration laws, while most of the Chinese immigration to the US has been since 1970 under immigration laws that cared more about ability. Based on that, I'd expect a more strict low pass filter on Chinese immigrants than Jewish immigrants.
That does distort some of the subsistence economy part of my previous comment though, so scratch that bit, but I think the simplification still holds.
We have good empirical data on international migration. And you are right: It is mainly the middle class that emigrates. Not to poor (too poor to muster the resources); not the rich (they are happy where they are).
While at it: The best single-volume book on international migration is Hein de Haas et.al.: The Age of Migration (441 pages; the 6th edition came in 2020).
Chinese communities in Singapore and Malaysia date back centuries, and are probably more akin to Armenian populations around the Eastern Mediterranean, Jewish populations in Europe, German populations in Eastern Europe, and Arab populations in East Africa, where they had been merchant communities in port or market towns playing middleman roles in locations that didn't have indigenous merchant communities for whatever reason at that earlier time.
"The huge influx of Chinese migration was directly caused by the poverty in rural China and massive employment opportunities in the British colonial or protectorate territories, with an estimated 5 million Chinese having entered by the 19th century."
Nothing in Singapore dates back centuries. It was part of the Majapahit in the 1400's and then it was a nothing fishing village with a few thousand people until the British got it at the beginning of the 1800's.
In the US, Indians are the most successful immigrant group (see the second chart in https://zachgoldberg.substack.com/p/exposing-the-group-disparities-discrimination), so it's not something inherent about Indian immigrants (leaving aside that India is a fairly ethnic diverse country). I'd guess that a significant difference is that Indian immigration to the UK has been a lot easier than Indian or Chinese immigration to the US because India is a commonwealth nation, but I'm not an expert there.
So the reason why Indians are disproportionately richer in the US is this: a lot of Indians study software engineering. The tech industry today is probably the most well paid industry out there. Hence most Indians who migrate to the US work in these well paid tech jobs, and consequently constitute a disproportionately rich community. This doesn't have that much to do with IQ or hard work or something
Software engineering is not that highly paid in other countries, although people of similar capabilities work there. The high salaries for software engineers in the US is mainly a result of the tremendous amount of money flowing in the silicon valley
Also, these wages might soon fall, as both Google and Amazon are now offering freely available certifications on the internet. Predictably, this will lead to a massive increase in the number of job applicants, leading to a fall in wages
Certifications are basically useless for a career in software engineering.
(I work in the field.)
If you want to make an argument, you could talk about a post Covid world making remote work more common, and thus opening up huge labour pools of people who no longer need a visa.
I've always been curious... given India's average PISA score - and the achievement of Indian Americans in the U.S. (believe highest income after Ashkenazi Jews?) - what does that imply for Indian immigration to the U.S.? Did we somehow manage to get the .01% smartest population? How is that possible? I mean even if you account for some Flynn effect improvement from just getting better nutrition in the U.S., it still seems wild.
To offer some perspective: computer engineering is the most sought after degree in India, and only the very top performing students get to study it in the better colleges. For instance, there's an entrance exam for engineering colleges in India, and out of the top 200 students something like 190 choose computer engineering. And almost all of these immigrate to the US. That is one of the reasons that Indians do much better at computer engineering than other disciplines. All the "best" (at least at the high school level) Indians are doing it
It turns out that the US immigration quota system is arranged to hand out permanent residencies in approximately equal numbers *to citizens of each country*, prioritized by more or less how highly educated the applicant's occupation is. Since India and China have huge populations, the ones that can get permanent residence (not H-1Bs) are extremely highly selected.
Indians are the most successful ethnic group in the UK by most metrics, it merits second paragraph status in their Wikipedia page (https://en.wikipedia.org/wiki/British_Indians). It's not just because they all study software engineering either, but I'll avoid speculating further since I'd just be relying on Indian stereotypes.
I can't find the exact quote for some reason - but I distinctly remember a line from one of his books where Lee Kuan Yew told a Chinese official (maybe Deng Xiaoping?) that China could be more successful than Singapore because China was composed of mainly higher intelligence North Chinese Han population (vs. Southern Chinese for SG).
What he said was that Singaporeans were the sons of brigands, pirates, fishermen and petty merchants while the mainland Chinese were descended from scholars and officials.
“You’re able to catch up with us, even better than Singapore, and there’s no problem at all,” Lee said.
“We are only the descendants of illiterate, landless farmers in Fujian, Guangdong and other places, but many of you are the descendants of officials and scholars,” Lee continued, as Deng listened quietly.
Fruit pickers - migrant itinerant workers prone to criminality and cycles of lavish expenditure/deep poverty on account of their seasonal income - are hardly as adventurous or brave as seafarers, nor are they as hardworking, dedicated, or loyal as simple farmers...
I also enjoyed and took a lot away from the book. But it seems like, from a political economy point of view, that doing all the things it recommends is really demanding of the government and while those recommendations can work spectacularly well if followed most countries just can't succeed in pulling it off and would be better off with the comparatively simple free market approach.
I agree very much with that point—that’s a lot of political capital and a lot of sunk cost if for some reason it turns out the world doesn’t really need a new car company
I think that would require some evidence that it is possible for any country to pull off the "comparatively simple" free market approach. It looks like the UK, and maybe Hong Kong and Singapore, did this. But all other developed countries went through a phase of tariffs and export replacement and so on.
Good chunk of post-Soviet countries adopted free market policies and most of them failed, so I do not agree that there were only a handful of 'free-market' developing countries. Also countries adopt 'free-market' policies often as the condition of getting IMF loans, so the list of such countries might be much higher.
To around two years ago*
But what about the Middle Eastern countries who tried very similar policies in the 60s and 70s, and it didn't help them at all?
You can't just pick successful countries who all have X in common and write a Just-So story about how X is the cause. You have to look at all countries with X.
Where can I learn more about the Middle Eastern side of things?
I found "Egypt on the Brink: From the Rise of Nasser to the Fall of Mubarak" useful as a source on Egypt specifically, though it's more political history than it is economic.
I feel like most Middle Eastern countries were not stable enough to keep the policies going. The most prominent example of socialist country trying to turn things around is probably Egypt. Egypt started with something similar in 1956 with Nasser, but by 1970s they were already deregulating their economy since they switch their side in Cold War.
Don't most of the Arab countries still have a hereditary nobility of large landowners? And haven't they stayed focused on bananas, rather than manufacturing? (Well, oil, but it's the same sort of thing as bananas. Some of the Emirates have tried to do something different, I suppose.)
I'm wondering how the small landowner thing should work when water is scarce and requires large-scale irrigation.
Read Elinor Ostrom's book "Governing the Commons". There's lots of interesting stuff in here about how various traditional societies figured out non-state non-market ways of solving common pool goods problems, including water rights among small landholders in Spain, that involved a complicated system of ditch maintenance that made it easily verifiable by everyone that everyone was doing their part fairly.
This article describes the system as applied in the US: https://craftsmanship.net/the-hydraulic-genius-of-shariah-law/
And yet after the irrigation system was destroyed by the mongols, it was never rebuilt. Kinda hard to square that with some sort of cultural genius for hydrology.
?? The article describes the use of the irrigation system in the US. I'm unaware of any Mongol invasion of the US — and the origin was Spain, and I don't believe the Mongols got that far. Could you clarify wrt to the article to which I linked?
Must steal that book....
I’m no expert, but didn’t Israel follow broadly similar policies to Korea, Taiwan etc and also succeed? My sense is that even (relatively) peaceful Turkey, Jordan etc have not been able to follow a similar path.
Israel has almost no privately owned farms though.
I wouldn't say that Israel followed a similar model: The early Kibbutzim were not privately owned, though being small and communal may have led to similar effects.
But Israel is something of a special case, having been built by immigrants. The earliest migrants were largely Eastern Europeans: Not quite American/British, but not Chinese either. There was also non-negligible immigration from Germany and either highly developed-European countries before WWII, and they would have brought substantial knowledge with them. That probably also explains at least part of the socioeconomic gap between European Jews and Middle Eastern and North African Jews and Arabs in Israel.
It's interesting that the most recent immigrant wave, of roughly one million often highly-educated immigrants from the USSR around 1990, actually had pretty low socioeconomic status, though it has since gone up. That may just reflect Israel's relatively high development by 1990 (to Soviet levels? IDK) plus some difficulty integrating.
I'd be interested in an analysis of the impact of each successive wave of immigration on Israel's economy and industrialization. https://en.wikipedia.org/wiki/Aliyah#Zionist_Aliyah_(1882_on)
There's an econ paper analyzing the labor market impacts of the Soviet Aliyah. Let me know if you can't find it in Google Scholar and I'll dig it up.
I wouldn't say the USSR jews were low socio economic status, they were only low economic status in Israel because of frictions entering the labor market (language, specializations). They were high socio status (education, culture) and indeed this shows in the catch up a generation later.
Could you dig it up? :)
I found two.
1) https://www.econstor.eu/bitstream/10419/102605/1/1996-28.pdf
2) https://www.econstor.eu/bitstream/10419/20581/1/dp1315.pdf
Thanks! (Somehow liking doesn't work.)
The counterexample I was thinking of was India, which implemented protective tariffs, manufactured their own crappy cars etc., and grew slower than Studwell's failure stories. At least in the Economist magazine version, the tech industry took off because the central planners didn't quite know what it was and left it alone, and India only achieved sustained fast growth post-liberalization.
How many car companies were competing in India?
Basically two, Ambassador and PAL, with the Suzuki-licensed Maruti introduced in the 80s. The argument would be that India did not enforce export discipline, and the “license Raj” bred complacency.
Not Tata?
Automobiles have been liberalized since, and their first passenger car was only in 1988. Tata used to make trucks, but not cars. They started making the Nano, but it's not a big success AFAIK.
To what extent did their similar policies include real internal competition and export discipline, rather than the government subsidizing and/or owning designated champions of industry? My admittedly vague impression was that Nasser et al were Soviet-influenced socialists and much more friendly to SOEs than to entrepreneurs.
The Middle East experienced the highest increase in the UN Human Development index at the time. Sure, oil wealth helped (although it also causes Dutch disease).
Isn't the Dutch disease thing largely a myth? If you have 2 countries, one with $10bn of GDP and the other with $20bn, but $10bn is from commodities. Then if the non commodity part of the economy grows 7%, overall growth is only 3.5%. And for the country with no commodities, it would be 7%. Even though rate of development is the same.
The idea is that commodities represent easy money, which drives out every other kind of investment. At the same time, commodity prices can be rather volatile, to put it mildly, especially if you are not the margin producer.
I don't see why it would drive out other kind of investment. I think the risk is more that leaders can get rich from stealing those commodities, and use to resources to live large and opress the population. Whereas with no commodities they are forced to develop, opening Pandora's box (in a good way).
But for the most part, the non commodity economy often grows just as fast, it is just that the commodity part of the income distorts the growth %'s.
As I understand it, the reason commodity investment drives out other investment is because the risk-weightes return is so much higher.
The other problem is that the risk doesn't go away, and is in fact quite severe and hard to diversify or hedge away, at least on a national scale. In other words, you're always at the mercy of oil prices.
Agreed. Dutch disease or not, it's better to be Iran than Pakistan.
A different version might be Africa where a variety of countries (most recently supposedly Zimbabwe in, say, the late 90s by appropriation, and still, to now, supposedly South Africa by buy and split white farmer land) have claimed to do this.
I’m unaware of any success stories. Did every one of these devolve into cronyism?
Interested in your recommendation for the best first book to read that talks about the Middle Eastern 60s-70s development story!
I read this in a French paper encyclopedia in the 90s, can’t remember which one, probably the Universalis annual supplemental volume, and in any case it would have been discontinued years ago.
Not sure about the details but I remember an Iraqi writing that Saddam Hussein was actually a pretty competent administrator when he was Vice-President before he staged his coup and power went to his head. Iraq certainly had the human capital: engineers, doctors and so on, not being burdened by the dead weight of Wahhabi indoctrination in schools.
Iraq's lack of human capital is one reason why Greg Cochran was confident they wouldn't have any nukes. Other reasons were sanctions & that chunks of the country were too hostile to the regime to contribute.
Most of those factors would also apply to North Korea, yet they managed to get nukes. It's a 1940s technology, well within the reach of most nation-states. It's only active measures to deny enrichment like those under the NPT that have prevented more widespread adoption of nukes by every tinpot dictator out there.
That's part of Greg's argument: NK had better human capital, so they could get nukes despite their awful economic system keeping them impoverished.
I think the frameowork of exisiting within a Theocracy is enough to outweigh all of the other changes. I mean it looks like many of those Middle Eastern countries were indeed in somewhat of a renaissance before religious factions came in and reorganized the entire game around a very different incentive structure that had little to do with maximizing economic growth.
And I think the author would claim that the set of circumstances he describes are situationally dependant semi-necessary but not sufficient.
>These countries started with nothing. In 1950, South Korea and Taiwan were poorer than Honduras or the Congo. But they managed to break into the ranks of the First World even while dozens of similar countries stayed poor. Why?
The real reason is that they got drowned in American/Western investment for geopolitical purposes. Its as simple as that really. I find that you always seem to assume that a country's successes or failures are dependent on internal factors as opposed to external. Its a bad habit you have.
Warning that you keep doing this thing where you keep being vaguely condescending to me for not realizing X, then not giving any evidence that X is true. If you keep doing this I will ban you.
Sure thing - Here's an article as evidence of what I am saying ( https://www.jstor.org/stable/2642405 )
This appears to be a 1965 article with no comparisons of American investment in Taiwan to American investments in Congo, Honduras, or anywhere else in Africa or the Americas, so I'm not sure that it supports your claim that the *difference* between these places is explained by a *difference* in American investment.
The article outlines the disproportionate levels of investment/aid given to Taiwan.
I'm just going to reiterate what Kenny is saying here - what you link to doesn't really support your thesis in the large. Plus, just linking to a JSTOR article without context comes off as moderately unhelpful. Personally - and I imagine this feeling is shared - I'm disinclined to go through the work of reading through random paywalled articles because there's a good chance it's a waste of time.
Also, just in general, making generalizations about people "I find that you always..." is really pretty unhelpful communication. Do you know this to be literally true? Take the second persian gulf war: do you think Scott blames internal factors in Iraq for the fallout from the second persian gulf war? My money's on Scott putting substantial responsibility on the military campaign and occupation. Even if he's like, fuck no, it was all the Iraqis fault for not having backup water treatment facilities, well, okay, then he's crazy. We just don't have enough information to know what Scott always does or doesn't do.
If you find yourself asserting generalizations about other people's beliefs that aren't literally true, then you're probably doing something wrong and should reevaluate strategies.
Unrelatedly, are you Chris Allen of haskell land? Think I had a pleasant dinner with you at lambda conf one year. Hope you're well.
"Since rich country economists kept leading everyone astray, the only countries that developed properly were weird nationalist dictatorships and communist states that ignored the Western establishment out of spite."
Here you are making an assumption that communists are acting out of "spite". This is very uncharitable. Actually communists have a very good understanding of the economy and the goals they wish to achieve. I would suggest that you read some of Marx's work on this subject such as Capital Vol. 1
I'll admit that I probably like Scott more than you do, but that read pretty clearly as tongue in cheek to me. "Leaders gave bad advice so the people ignoring the advice clearly were doing it out of spite" strikes me as a reasonably witty way to poke fun at the bad advice given and the success of the people who didn't follow it.
It's not about "liking" Scott, it's about looking at his history of being able to analyse politics. We've seen previously that any political ideology that doesn't confirm to his ingroup seems to be beyond his understanding. Instead of charitably engaging with the outgroup he jumps to accusing them of "spite".
You can say this is "tongue-in-cheek" - but tongue-in-cheek in service of what? What follows is not an actual analysis of communist political analysis and goals.
The sentence is about BOTH communist & non-communist regimes, so it doesn't have to be "an actual analysis of communist political analysis and goals".
Communist regimes don't act out of spite, though. It's weird that Scott would write this, especially since Rationalists typically try to be charitable to the outgroup.
>but tongue-in-cheek in service of what?
He did it for the lulz.
I'd prefer if we were in favour of niceness, community and civilization. I don't think cheap jokes help with any of those categories.
Would it not be correct to say those countries general world views suggested that those rich economists were basically self interested jerks or active facillitators of imperialist capitalism, so would not spite be a correct motivation as to why they were ignoring them?
I am absolutely certainly not going to say that Chris Allen is right about anything, but you do seem to have a habit of adopting the first plausible seeming explanation of anything as The Real Truth and then turning around making a blog post about it. That can be a bit disappointing to see.
Also, sometimes foreign investment really did spark entire industries. RCA in Taiwan. Singer, too. Then the plant employees start copycat firms, or small parts firms, etc. But that foreign investment did matter.
This seems implausible. What geopolitical purposes were served by investing in East Asia rather than the Middle East? Even Latin America, Subsaharan Africa, and South Asia were also parts of the "third world" that the first and second world were fighting over for allegiance during the Cold War, but the Middle East was just as much the front lines as East Asia, and had the additional presence of a geopolitically important resource.
Surely the US also invested a great deal in the Phillipines, both when it was a literal colony and then as an independent state?
Subic Bay? That's where the US fleet was based.
WWII also wreaked hella devastation on the Philippines, and the Philippines are much better positioned to cut off routes into or out of Mainland China.
A big difference in postwar land reform in the Japan vs. the Philippines was due to the fact that the rich in Japan were the enemies of the U.S. in 1941-1945, while the rich in the Philippines were our heroic friends fighting our mutual enemy the Japanese behind enemy lines. So, expropriating the Japanese ruling class seemed a much more morally fitting policy to Americans than expropriating the Filipino ruling class, who had just gone through four years of occupation.
South Sakhalin was seized by the USSR after WWII (and Manchuria/Korea were removed from Japan's control), so I'm not seeing where the USSR had a land border with postwar Japan.
Given the giant US built port at Dharhan, the giant US built airbases at King Khalid, and the giant US built oil pipelines crisscrossing Saudi Arabia, I think you underestimate what Aramco was up to.
What Aramco was not up to was a large scale rewrite of society ala MacArthur or Mao.
Another interesting case is Iran, which seemed (by numbers and cultural indicators) to be one of these success cases under Mosaddegh, who pushed the British out of ownership positions and passed a land reform act, until the 1953 coup, when the west installed the newly empowered Shah, who proceeded to run western friendly policies.
His policies were "western-friendly" in that he opposed the communists, but my recollection is that they were also quite pro-development and included land reform.
Iran bordered the Soviet Union and was in the US sphere until 1979. Pakistan was in the US sphere, borders China, and only 10 miles of Afghanistan separated it from the Soviet Union. This chain (Turkey-Iran-Pakistan) was extremely strategically important because it kept the Soviet Union from having access to the Indian Ocean.
The claim that started this subchain was that US strategic interests rather than the Asian development model are the cause of east Asian succes.
The fact that these other countries which are also of great strategic importance to the US didnt become rich is strong evidence against this claim. The lack if the Asian development model even more so.
This is the nobody-has-agency-because-cia theory of FP.
The US isn’t responsible for any of it in SK. For a decade after the Korean War it was a complete shit show. It wasn’t until Park took over and while the US may have supported him (as they supported his predecesors), it wasn’t as though the cia parachuted in a bunch of marxist land reform economists to tell him what to do.
We were all over the Honduras at the time, and as always, we let their local rich run their show. As they would have without us.
I don't know where you got the many multiples of GDP for many years in a row claim from - it's not even in the post you linked to - but it is false. SK nominal GDP grew exponentially from some $3B in 1960 to $9B in 1970 and $67B in 1979 (https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=1979&locations=KR&start=1960&end=1979). The total nominal aid (ODA + OOF) to SK can be fetched from the OECD stats database (https://stats.oecd.org/Index.aspx?DataSetCode=Table2A#). It averaged $200M/y in 1960-1967, $500M/y in 1968-1974, and $1B from 1975 to 1982, then fell off to zero over the following couple of years. Note that this sum includes loans as well as grants. While I don't know how to fish this data out of the OECD website, Figure 4 in https://cdn.odi.org/media/documents/191203_republic_of_korea.pdf says that loans predominated after 1969. I.e. total aid (grants plus loans) never exceeded 10% of the GDP over this period. I should also remark that SK had to spend quite a lot of money on the military rather than on building its economy. World Bank data (https://data.worldbank.org/indicator/MS.MIL.XPND.CD?end=1979&locations=KR&start=1960&end=1979) shows that military expenditures amounted to about 2/3 of the foreign aid over this period. While this spending might not have been a total loss for the Korean economy, it is quite implausible that it could not have been invested more profitably elsewhere.
Taking a rough look at the data (FDI as a % of GDP) this doesn't seem right. I don't know how to attach an image, but the link below has Malaysia having the most FDI followed by China, Philippines, then Korea, then Japan. https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS?locations=CN-JP-KR-MY-PH
Where does Vietnam fit in this narrative?
It seems to be booming now and that uptick seems to start before increases to FDI.
Do you expect it not to follow the same tragectory becuase it isn't as geopolitically important?
I mean, no one would be foolish enough to wage a war in such a geopolitically unimportant place.
Also pure cope. Singapore was poor as dirt when it first broke with Malaysia and completely eschewed outside aid. Yes, foreign businesses *invested* in the country over time, but that's because of its strong rule of law and human capital - they could reasonably assume a return on invested capital.
Singapore was poor but not as dirt. At independence it was already 1.5 times richer than Malaysia - relatively rich by developing nation standards. It's now three times richer. Also Singapore didn't exactly eschew outside aid - LKY kept flying commercial to international meetings to keep appearances up to keep receiving aid. They eventually caught on and stopped sending aid.
>but that's because of its strong rule of law
Since when was rule of law a factor in investment? It certainly has not stopped people investing in China, Pinochet's Chile etc.
I think you could fairly easily make the case that China would be far richer if it had more proper rule of law (see Taiwan as a nice counterfactual).
Was Pinochet's Chile known for weak business law? I thougth just the opposite? People need to be sure their capital won't be randomly taken by the state in order to invest.
The Chinese economy is growing faster than any economy in history and will outpace the US eventually. I don't think the Western model is one that they should follow considering its causing stagnation in the West.
Meh - a lot of that is catch-up growth which is what happens when you have a country with very high human capital that's been held back economically by a planned economy. Let's see if they can keep it going once they get to Western GDP per capita. I highly doubt it and would be willing to wager if someone wanted to take the other side.
China's rise began under the planned economy of Mao and you could argue Post-Deng China is still in a more moderate sense a planned economy given the interventionist and guiding role the CCP plays. China's economic model is not just a copy and paste of Western neoliberalism
The U.S. was actually quite protectionist against Japan, and mostly held it back (relative to the very similar Italy) rather than driving its economy forward.
I beat up on American foreign policy as much as the next feline, but I am pretty sure that for much of its history, South Korea did not allow foreign investment.
>Unfortunately, most countries practice bad economic policy, partly because the IMF / World Bank / rich country economic advisors got things really wrong.
Scott you are so close to an important realisation. This is not a bug, it's a feature. The IMF/World Bank and all these other Western-centered/founded organizations are designed this way. The purpose is to keep the Third World in the dirt at the West's benefit. Its modern-day neo-colonialism.
The longer I think about this, the more plausible this looks.
What is the benefit to us of keeping Africa poor? Don't we get lots of benefits from trading with and offshoring too South East Asia, the area the conspiracy chose not to keep poor.
So the intention is not to keep Africa poor. The intention is to keep the markets of Asia and Africa open for US products. In some countries, this thwarted growth and led to poverty
Surely they'd be able to buy more U.S. products if they weren't poor? The U.S. isn't where you go to manufacture cheap-as-possible consumer goods that market to the poor.
Yes but the world bank doesn't know that keeping the markets open for American products would keep these countries poor. This is a fairly new hypothesis that is proposed in this book, and I'd argue that it's majorly flawed (although it offers some interesting insight)
That is... Not a new hypothesis at all. Heterodox economists have been proposing this idea since the 70s.
The only way for them to get not poor is to make products, and then they can buy products from themselves instead of the US.
This assumes "products" is just an interchangable category. Countries do not make Units Of Generic Universally Exchangeable Product and comparative advantage is a thing.
... no?
Africa will have 4 billion people by 2100. Nigeria alone is projected to have 800 million people - more people than all of North America. If their GDP/caps went up, where would the US and EU be?
Much wealthier because there would be a bigger market for stuff that's heavily produced in the west (like software, movies, cars, etc.)
If their wealth went up that much they would start to produce those things themselves, and meanwhile the prices of bananas are going through the roof. It turns out you now have to pay your banana farmers $15/hr wage.
Nevermind the geopolitical position of the United States. China already produces an increasing anxiety among westerners as is. This could be China x5
There's an enormous gap between the current development level in Africa and being able to make their own high end tech goods. And they will be more profitable to the US as they get wealthier at least until they reach that point.
To make it concrete: if you triple the GDP of Nigeria, you'll get a big increase in the market for Avenger's movies, and zero increase in supply.
The same will hold true for cars, software, and pretty much any luxury or high-tech good you care to name.
It's far-fetched that all the elites in the west are coordinating against their own short and medium term interests in order to avert a possible super-long-term issue where Nigeria mostly catches up to us in development. People don't coordinate that well.
Countries may not leap strait from coffee beans to avangers movies, but they can leap to other industires the US might want to keep domestic. I just read in this very reveiw that Cars seem to be the first line of attack for many of these prospective wealthy nations.
I also dont think there is much of an coordination going on here, just individual countries acting in self interest.
Britain had a policy of disallowing advanced industries in India during colonial times. It does not seem farfetched to me that the'd aspire to continue to persue that same objective in the present.
Nigeria actually has a pretty developed local film industry, known by the *entirely original* name of Nollywood.
Happier and healthier. Less environmental destruction. Less mass immigration and border crises. Richer.
> less enviromental destruction
https://ourworldindata.org/grapher/co2-emissions-vs-gdp
Yes, on an emissions front you are correct. Unfortunately the focus on global warming has obfuscated somewhat the myriad of ways that are not directly tied to CO2 emissions that human beings devastate their environments.
We know development dramatically reduces birth rates. This is the #1 way that development will result in less environmental desctruction.
Poaching and deforestation are best protected by strong institutions/rule of law. Poorer countries with rapid demographic expansion struggle to maintain these.
Look at the end of the day the question you have to ask yourself on this point is: (1) are you going to use violence and force to prevent development and maintain huge populations in pre-industrial lives or (2) are you going to invest and work with them to accelerate them more rapidly through the most damaging environmental phases of development and to a more sustainable future.
#2 we haven't really proven can be done yet, but I'm optimistic that as alternative energy sources develop we will enable today's 3rd world countries to "leap frog" over some middle stages in the same way they were able to with mobile phones.
I find some people here tend to overvalue free trade. There is a lot more complexity to the global world, free trade isn't a positive thing a priori.
Also like, it's not a 'conspiracy', this is just the natural tendency of world leaders in developed nations. It's only a conspiracy if they're intentionally working together, but they don't even have to, it's just kind of obvious and in their best interest to keep small nations neo-colonised.
It's certainly not obvious to me that it's in their best interest. I'm not sure it's obvious to them either.
If you're the powerful one you can dictate the terms of free trade agreements and you can send your companies in to pillage the wealth.
If they thought it was not in their best interest then why don't they lift Africa out of poverty? Their aid is pauper and intended for the purposes of debt-trap diplomacy.
I don't think there's a magic button that would lift Africa out of poverty. The world overall would surely be better off if Africa even had Latin American levels of GDP per capita. That would be highly beneficial to Western economies since it would mean more trading partners. There's no secret conspiracy to keep Africa poor.
I'm aware there's no magic button but they're not even trying and that much is obvious.
How exactly would strong competitors who would challenge the West's hegemony be a good thing for the West?
The essence of free trade agreements is that neither party can dictate the terms. Or, alternately, that both parties can - but the trade doesn't happen unless both parties agree to it. So you need an explanation as to why the African parties to this trade are agreeing to deals meant to pillage their wealth.
Mostly because the people that negotiate the contracts benefit from the agreements. That does not mean that the country itself benefits. It's the same in the East Asian countries that are mentioned as failures. Thailand may not have the growth of South Korea, but King Vajiralongkorn sure isn't suffering.
If somebody approaches you with a knife in an alleyway would you not do what they tell you to? Unequal power relationships often result in bad situations for the weak.
One benefit for capitalists keeping a section of people poor is that the value of labor power is kept low too.
"How Europe Underdeveloped Africa" by Walter Rodney is the classic text here.
Hmmm what's strange here is American and European capitalists made more money than at any point in modern history..... capitalizing off the labor of countries that didn't listen to the "consensus" - China, Japan.
The number of billionaires and millionaires minted off communist china vs those minted off Africa is comical. These capitalists must be terrible at their global conspiracy.
I think you’re missing the individual incentives here. In the short run, foreign investors do better to keep commodities cheap and own more banana farms. Sure economic development might help investors in 30-50 years. But what incentive do today’s investors have to prioritize the profits of investors half a century from now over their profits today?
Yes, capitalism is a contradictory system that doesn't work especially well. Marx showed this over a 100 years ago.
And yet socialism keeps getting its ass handed to it by capitalism. Must be a really sucky system.
Socialism is the next logical step, but I don't think it's so surprising that it's developing in fits and starts. Capitalism's early years were very shaky too. I'm not sure why you would be so dismissive of socialism. Have you read Marx?
The single biggest way is farm subsidies and tariffs in the US and EU that prevent Africa from exploiting its comparative advantage. They don't benefit the US or EU globally since consumers who make up the bulk of the population pay higher prices, but they *do* benefit constituencies with disproportionate political power like farmers in rural states.
The UK realised that in the 1840s when it abolished the corn laws, and when I go shopping for groceries in the UK, I regularly see produce shipped from Kenya on the shelves. Maybe not great for the environment, but excellent for improving the lot of ordinary people in the cradle of humanity.
Cheap labor providing cheap natural resources? A population of 1.2billion not providing any serious competition in any industry?
That's the right question to ask. And it comes down to the age-old concept of comparative advantage. What do rich developed countries want to export? The sort of know-how- and capital-intensive products and services that they have based their economies on. Ideally, export those for eye-gouging prices to countries that cannot make these products themselves.
What do rich developed countries want to import? Natural resources (which they consume/process out of proportion to their population size) and products that require lots of low-skill-labor. Ideally, very cheaply because loads of countries have nothing else to export.
In this sense it is in the interest for rich developed countries that the rest of the world keeps exporting lots of bananas and is not capable of making high-tech-stuff. Just as Scott mentioned that the "financial-hub-niche" is a good gig if you can get it, the "things-only-developed-countries-can-make-niche" is great too, especially if it doesn't get too crowded.
And there IS a lot of anxiety in developed countries about other countries catching up. See eg. all the hand-wringing (at least in Europe) about the threat of losing jobs to China, India or Eastern Europe (from the perspective of Western Europe).
Nobody makes 3rd world governments take the money. They could always tell the World Bank to sod off.
"Nope, sorry don't want the billion dollars" is not a very common sentiment anywhere
Also the politicians who make such deals are often from a very different class and have different goals/interests compared to the population of the country as a whole.
You guys are the ones making the case that the influence of these organizations is nefarious; unless you think 3rd world governments are too short-sighted or ignorant to see the same things you're seeing and act on them, I don't know what to tell you.
Secondly, keep in mind these billions of dollars you're talking about are usually not gifts or grants; they're typically loans that have to be paid back. I don't know about you, but I get offers from people to loan me money all the damn time, either from credit card companies or banks, credit unions, or mortgage companies, and I have no problem saying no to these people every time.
I don't think loans to countries work like loans to individual people. By the time the loans are due, the politicians may be long out of office or even dead. You can call that "short-sighted", but political leaders have a lot of incentive to be "short-sighted".
That's true, but that goes for every form of borrowing, not just World Bank/IMF lending, and the temptation exists for any government with semi-predictable turnover. At least a few Asian countries managed to resist. What's everybody else's excuse?
Are you asking why all countries haven't instituted communism yet? That is a very difficult question to answer.
It's economic blackmail. "Take the money or you starve" is not exactly a free choice now is it?
I see, so when Raghuram Rajan was Chief Economist at the IMF back in the early 2000's, he was actually conspiring with the West to keep his fellow Indians poor? I suppose that's what Gita Gopinath is up to right this very moment, trying to impoverish her home state of Kerala.
There's no "conspiracy" here - most people just have a closer allegiance and ideological alignment with others of their class rather than others of their nation. This has been obvious to Marxists and others for a long time:
https://en.wikipedia.org/wiki/Comprador
He believed he was doing the right thing. No conspiracy. "Here is some money, also open your market. Both will be good for you, but you need to take them together."
But if opening the markets in developing countries is actually poison, as this book contends, than this is a problem.
That's unlikely, and so you would need strong evidence to convince anyone. How does keeping your trading partners poor help you? They can't afford to buy your stuff that way.
Never attribute to malice that which can be adequately explained by stupidity.
I have never met anyone that believed their life's work was designed to harm others this gravely for their own personal benefit. Virtually every one believes they are the heroes of their own stories. I can't say that it's not possible that people go to work for the IMF and World Bank thinking about how to best exploit the third world, but is seems much less likely than them having good intentions, but being mistaken. Especially with how afraid they were of communists taking over the world. They'd want powerful allies, not weak ones.
>Never attribute to malice that which can be adequately explained by stupidity.
When said individuals are known to be malicious its fair to assume they are complying with their nature.
All you have to do is look at the West's history of colonialism and savagery in the 20th century right up until the present day where they murder Iraqis for oil and support the genocide in Yemen.
By your name, you seem like a westerner. Are you a savage colonialist who likes murdering Arabs and keeping the third world poor?
Let's look at incentives. Are the employees of IMF rewarded based on how the countries they advise prosper, or based on whether they recommend the "correct" (i.e. popular in the West) things?
Serious question; I have no knowledge about this, other than my priors.
Maybe part of the macro story is that the World Bank and the IMF are monopolies and thus insulated from the effects of their policies. What would it take for them to get some competition?
There are many development banks that compete with the World Bank. The IMF does a few things, but mainly aims to make loans to countries when no one else will. So sort of by definition there couldn't be competitors, or else the IMF just wouldn't make loans in that situation.
Governments could support more than one bank for lending money to countries that can't get loans otherwise.
There is competition now, what with Belt and Road and AIIB getting into the game. Competition is good for development. One wonders why the West is so adamant that Chinese competition is malign...
Because Chinese investment is malign for the West, since it weakens their hold on developing countries.
Arguably Chinese investment is good for developing countries, since it gives them more options.
Arguably Chinese investment is bad for the world, since it strengthens China, a country with a very poor human rights record.
I think a lot of people are willing to do the occasional salute to Mr. Xi if it means they get to eat dinner. You can protest that freedom is always more important than mere products, but realise you do so from the privelage of knowing that statistically none all of your children will make it into adulthood.
Also, hopefully western isntitutions will try to better their conditions to compete with chinese ones.
It's not good. China doesn't understand that what became colonialism was the aggregate of a bunch of practices that Europeans adopted to make money while abroad.
Instead, in China, and much of the formerly colonized world, colonialism is taught with the implication that Europeans got together in the 1500's and had a "Let's be evil and take over the world meeting." They didn't.
European governments and businesses seized power and territory abroad because it was profitable. They overthrew local rulers to protect revenue streams. They got special dispensation from local law to avoid interruptions for their money making.
None of this is uniquely evil, nor was it a centuries long conspiracy, rather it was just companies and people going from A to B to C because each jump made them money and they happened to have the technology and military power to back it up.
China is now investing abroad. China knows that they never had a "Let's be evil" meeting. So obviously they can't be doing anything colonial.
When Chinese businesses want to be exempted from local law in Djibouti... they are doing that for good reasons. Not for the evil reasons that saw foreigners get exempted from Chinese law in the 1800's.
China doesn't want to realize that many of the same incentives that caused Europeans to adopt colonial practices also apply to Chinese businesses.
It makes no diffrence to me wether China has had a "let's be evil" meeting, an "let's make money" meeting or even an "let's help out africa out of selfless kindness" meeting. What i care about is results.
If China is succesfull in lifting Africa out of poverty im cheering either way. The difference between Chinese neocolonialism and actual colonialism is twofold
1. Actual colonialism didnt contribute to the development of the colonies at all, and even reverted it. Precolonial Timbouctu had a long scolarly tradition, after a century of colonialism there were barely any university-educated people left at all.
2. Colonialism may have started with trade, it quickly turned into violent conquest. (will China start conquering africa? seems unlikely).
1) Timbuktu was in 400 years of decline before the French got there. And France had less than a century there.
Actual colonialism had a mixed generally negative record. That said, the people doing the colonizing generally justified themselves by saying they were bringing benefits to the poor inhabitants.
2) it generally took decades or even centuries for trade to turn to violent conquest. With the exception of the Spanish in the new world, most of colonial conquest had a long lag time. The east India company started in the 1500's and they didn't conquer anything until the late 1700s. France got Indochina only in 1885.
But the point is violence was on a list of options and it was chosen because it was profitable. What will China do if some Eritreans murder 67 Chinese workers? Are they really going to be principled non interventionists there?
"mainly aims to make loans to countries when no one else will".
So, because those loans are unlikely to be paid back.
It takes a country with a lot of cash and its own political interests to promote - I believe this is the role of Chinese loans to developing countries, especially in Africa.
A country can get loans from private investors, generally by issuing bonds. That's the default way of getting loans. Countries only turn to the IMF if they have already fscked up badly enough that private investors don't trust them to pay the loans back, so they are on the brink of a sovereign default. Which has happened quite often to poor countries.
china
I started, but didn't finish the book. My basic objection to it was that it felt to me as if it could have been purely cherry-picking. He's looking at 'the Asian countries that did well', which gives him six countries (Korea, Japan, China, Taiwan, Hong Kong, Singapore), and sometimes he talks about all of them, and sometimes he removes Hong Kong and Singapore (because city-states don't have the same problems as larger countries), and sometimes he removes China (because it started horrible and Maoist), and sometimes he removes Japan (because it was in the 19th century when things are different), and sometimes he removes all four of them and only talks about exactly two countries, and the result of this is I really can't tell if he's actually got a point about what works well, or if he's picking and choosing for the sake of the arguments he wants to make. This isn't the claim that he definitely is cherry-picking, but the much less confident statement that I can't prove this isn't really is the Elderly Hispanic Woman Effect in the field of economic history.
I suspected as much. I think that anyone who has a grand theory of economic development, and isn’t a billionaire, is obviously full of it.
Market monetarist can sort-of honestly claim to have a grand theory without being billionaires. But that's because one of their main ideas is that markets are fairly efficient, so it's hard to second guess them to make more money.
This seems like cheating
They are usually less about development, and more about arguing that eg the central bank shouldn't have models to predict inflation, and instead just use market forecasts.
If no market forecasts exists for a particular measurement, they should sponsor a suitable market.
This is irrelevant to the book review, but I got an overwhelming feeling of deja vu from your name before realizing it's the name of one of my favorite villains in Rurouni Kenshiin. Been over a decade since I read it; perhaps it's time for a revisit...
you need a lot more than a good theory to become a billionaire
1. Starting capital
2. People that believe in your idea enough to work with you
3. (in this case) a country to run
Better to have cherries to pick than none. Which countries have moved from developing to developed in that space of time, without having been an entrepot city state, and used Washington consensus policies?
No comment! I couldn't quote the Washington Consensus policies without looking them up, and my historical knowledge does not cover 'all countries in the world.' This was a report that my (possibly oversensitive) Bullshit Detector was going off, not a full-scale alternate theory ready to set up for debate.
Would Chile count? I'm not too familiar with it's hisotircal details, but it's a higher GDP per capita than China or Vietnam and wasn't already developed like Japan nor a city state (which leaves only South Korea and Taiwan from the East Asia list).
Also the post communist Baltic states?
They're the closest, I think. But I suspect that's because they were 1) ex communist and 2) European. Communism does do a lot of state directed investment, which doesn't have to be great to have a positive return if you're poor to start with. But it's lacking the market test that export directed investment has. Even so it can do catch up growth in a somewhat ok fashion. What I think happened with the post communist states is that the old regime invested a lot albeit inefficiently, and opening up enabled them to improve from that point on, similar to how Washington consensus type stuff must come into the Studwell model eventually.
Some of the post-communist EU countries (Poland, Czechia) would be good examples. The post-1989 Polish establishment was infamously supportive of free-market economic policies. For example, the "Balcerowicz plan", also known as "shock therapy", involved overnight conversion of a planned economy to a market one. Everyone knows this was tried in Russia and failed miserably, but few people remember it was tried in Poland, too, and Poland is now basically a first-world country, with the per-capita GDP of South Korea in 2005.
I think "ex-communist plus European" is not quite enough of an explanation for these countries' success, because Ukraine, Russia, and Moldavia share these characteristics, but emphatically not the success.
The starkly different trajectories of post-communist countries are generally a fascinating subject. I'm yet to come across a good discussion of it.
Yeah, Russia had a terrible transition. Devil in the details there. What's worse is that Chinese saw that and concluded political liberalisation is bad....
Both Russia and Poland converted quite fast to market economy, but in very different ways and the term “shock therapy” only applies to what the Poles did. Russia and the rest of the former USSR could not stop organized crime from subverting the reforms for their personal gain—if the leadership even tried that is.
Don't think so - rate of growth wasn't that quick. There are a lot of countries that are richer than China or Vietnam - the reason they're development successes is because they're moving up quick. And Japan post war wasn't rich, nor was it pre war, though it was much richer than prior to the Meiji reforms that implemented the Studwell formula.
It's not possible not to cherry pick history. There are only so many countries in Asia, and all of them are special cases.
I sure love the intro to this post! (I haven't finished reading it yet but am excited to.)
Meta: Is it useful to start a prominent TYPO THREAD in the comments if one doesn't exist? Answers I can imagine: (a) yes please, (b) no please for creating a new comment thread but if one already exists, go ahead and add to it, (c) better to email them or post them to ____.
Non-meta: Typo at "These was nothing predetermined about this"
Not exactly a typo, but perhaps a point to revise - the quote about the land reform charity is in the review twice. snippet: "The leading NGO promoting land reform, US-based Landesa"
I've seen people list typos in their comments. It's an informal process.
Centralizing typo responses to a single thread is a great idea I think.
> Also, is it just a coincidence that Chinese / East Asian people in Malaysia and Singapore (and now the US) are known for being especially smart, rich, and good with money?
It's not a coincidence, but the reason is pretty simple: there are a lot of people in China and the ones who immigrated were the ones who had the resources and education to go. The ones who came to the US were the ones who were able to get to a port and pay for a ticket. Similarly the Chinese people in Malaysia and Singapore were often there running businesses or working in industrial sites that the British set up.
In both cases you're comparing the cream of the crop of a large ethnic group to the local people, so the result is going to be biased.
In any case, given that Malaysia did have a large local pool of ethnic Chinese businessmen, while Korea didn't, it would be strange for someone to think that the influence of Chinese economic ideas was relevant to why Korea succeeded and Malaysia didn't.
The monoculture aspect seems important, as it was present in all of the success stories (or in China's case the dominant culture). Of course, the Western mainstream still has multiculturalism and diversity as undisputable Big Good, so open acceptance of the importance of this point is out of the question for now.
Singapore is the opposite of a monoculture - it's far more ethnically, religiously, and linguistically diverse than any Western country. (But maybe this is relevant for becoming a financial and tech hub rather than an agriculture and manufacturing one?)
Singapore is a success because they let in diverse people and let them do their thing. Same with Shanghai and Hong Kong. (These were cities that the British built)
There's a great article over on acoup.blogspot.com which talks about how Rome was successful in the Republic period because it was astoundingly diverse and had much more lenient citizenship laws than most of its neighboring city states. Rome didn't care about your language or your religion. Instead, they punched you in the face and said, "I have beaten you, we are now friends, let's go beat someone else together" Essentially, Rome wasn't limited to one city and was able to draw upon the military resources of most of Italy, because they really didn't care as long your city sent troops to join Roman wars.
The unification of Italy into a Latin speaking single culture happened actually after Rome had been regularly using allied soldiers from the rest of Italy for a good 200 years. https://acoup.blog/2021/06/25/collections-the-queens-latin-or-who-were-the-romans-part-ii-citizens-and-allies/
Yeah this felt like a forced "intelligence is hereditary" argument to me as well. However, it is pretty simplistic to assume that only the smartest and hardworking people from China (and India) immigrate to other countries. I'd imagine Chinese immigrants to places like Malaysia and Singapore would have been people looking for better opportunities after having failed in China, as both of those countries were very poor when this immigration happened.
In my opinion, in countries as old as China, Moloch would essentially prevent you from progressing very far, regardless of your talent and ambition. This of course is not a factor for newer countries like Singapore (and the United States a couple of hundred years back, in which people with talent and ambition could succeed
I imagine that it's really more of both a low pass and a high pass filter. The top talent and wealthiest stay behind in China because they don't need to migrate while the poorest and least educated people don't even have the resources to migrate. I'd also guess that in a subsistence economy many people are stuck in that latter category, so the people who migrate would often come from a relatively privileged background but can't progress any further because of Moloch.
Admittedly there are a lot of guesses going into my theory, but I think the general gist is right.
I think this is possibly an unhelpful simplification. The high pass filter doesn't apply to talent. For instance, basically most of the world's top talent wants to immigrate to the US for better pay and living conditions. The low pass filter should be really, really low. Scott talked about desolate Jews with criminal histories migrating to the US. We also see something like that today in some places.
Most Jews immigrated to the US prior to 1924 and the onset of much more restrictive immigration laws, while most of the Chinese immigration to the US has been since 1970 under immigration laws that cared more about ability. Based on that, I'd expect a more strict low pass filter on Chinese immigrants than Jewish immigrants.
That does distort some of the subsistence economy part of my previous comment though, so scratch that bit, but I think the simplification still holds.
We have good empirical data on international migration. And you are right: It is mainly the middle class that emigrates. Not to poor (too poor to muster the resources); not the rich (they are happy where they are).
While at it: The best single-volume book on international migration is Hein de Haas et.al.: The Age of Migration (441 pages; the 6th edition came in 2020).
Chinese communities in Singapore and Malaysia date back centuries, and are probably more akin to Armenian populations around the Eastern Mediterranean, Jewish populations in Europe, German populations in Eastern Europe, and Arab populations in East Africa, where they had been merchant communities in port or market towns playing middleman roles in locations that didn't have indigenous merchant communities for whatever reason at that earlier time.
"The huge influx of Chinese migration was directly caused by the poverty in rural China and massive employment opportunities in the British colonial or protectorate territories, with an estimated 5 million Chinese having entered by the 19th century."
https://en.wikipedia.org/wiki/Malaysian_Chinese#Early_history
I get the distinct feeling that in the past, immigrants primarily constituted of the poor or prosecuted.
Nothing in Singapore dates back centuries. It was part of the Majapahit in the 1400's and then it was a nothing fishing village with a few thousand people until the British got it at the beginning of the 1800's.
There are lots of Indians in India, many of them emegrated to the UK. I don't believe Indians have the same reputation here.
Surely this should prove that in every country imagrants should be disproportionately successful which doesn't seem to be the case
In the US, Indians are the most successful immigrant group (see the second chart in https://zachgoldberg.substack.com/p/exposing-the-group-disparities-discrimination), so it's not something inherent about Indian immigrants (leaving aside that India is a fairly ethnic diverse country). I'd guess that a significant difference is that Indian immigration to the UK has been a lot easier than Indian or Chinese immigration to the US because India is a commonwealth nation, but I'm not an expert there.
So the reason why Indians are disproportionately richer in the US is this: a lot of Indians study software engineering. The tech industry today is probably the most well paid industry out there. Hence most Indians who migrate to the US work in these well paid tech jobs, and consequently constitute a disproportionately rich community. This doesn't have that much to do with IQ or hard work or something
Software engineering wouldn't be so well paid if it didn't take hard work or intelligence to do.
Software engineering is not that highly paid in other countries, although people of similar capabilities work there. The high salaries for software engineers in the US is mainly a result of the tremendous amount of money flowing in the silicon valley
Also, these wages might soon fall, as both Google and Amazon are now offering freely available certifications on the internet. Predictably, this will lead to a massive increase in the number of job applicants, leading to a fall in wages
Certifications are basically useless for a career in software engineering.
(I work in the field.)
If you want to make an argument, you could talk about a post Covid world making remote work more common, and thus opening up huge labour pools of people who no longer need a visa.
I've always been curious... given India's average PISA score - and the achievement of Indian Americans in the U.S. (believe highest income after Ashkenazi Jews?) - what does that imply for Indian immigration to the U.S.? Did we somehow manage to get the .01% smartest population? How is that possible? I mean even if you account for some Flynn effect improvement from just getting better nutrition in the U.S., it still seems wild.
To offer some perspective: computer engineering is the most sought after degree in India, and only the very top performing students get to study it in the better colleges. For instance, there's an entrance exam for engineering colleges in India, and out of the top 200 students something like 190 choose computer engineering. And almost all of these immigrate to the US. That is one of the reasons that Indians do much better at computer engineering than other disciplines. All the "best" (at least at the high school level) Indians are doing it
That's what high skilled visas are supposed to do: they only let in people with college degrees.
It turns out that the US immigration quota system is arranged to hand out permanent residencies in approximately equal numbers *to citizens of each country*, prioritized by more or less how highly educated the applicant's occupation is. Since India and China have huge populations, the ones that can get permanent residence (not H-1Bs) are extremely highly selected.
Indians are the most successful ethnic group in the UK by most metrics, it merits second paragraph status in their Wikipedia page (https://en.wikipedia.org/wiki/British_Indians). It's not just because they all study software engineering either, but I'll avoid speculating further since I'd just be relying on Indian stereotypes.
I can't find the exact quote for some reason - but I distinctly remember a line from one of his books where Lee Kuan Yew told a Chinese official (maybe Deng Xiaoping?) that China could be more successful than Singapore because China was composed of mainly higher intelligence North Chinese Han population (vs. Southern Chinese for SG).
What he said was that Singaporeans were the sons of brigands, pirates, fishermen and petty merchants while the mainland Chinese were descended from scholars and officials.
It was a bit of a dig, actually.
Good call:
“You’re able to catch up with us, even better than Singapore, and there’s no problem at all,” Lee said.
“We are only the descendants of illiterate, landless farmers in Fujian, Guangdong and other places, but many of you are the descendants of officials and scholars,” Lee continued, as Deng listened quietly.
https://theindependent.sg/lee-kuan-yew-were-only-the-descendants-of-illiterate-landless-farmers-in-fujian-and-guangdong/
The two got on really well with each other. Deng's China learned a lot from Singapore.
Who says that the pirate or the runaway sailor is necessarily dumber than the scholar official? Scholars being overspecialized is an old, old trope.
LKY was a big genetic determinist, so I doubt he meant it as an insult.
E.g. his fruit pickers comment on U.S. immigration.
Fruit pickers - migrant itinerant workers prone to criminality and cycles of lavish expenditure/deep poverty on account of their seasonal income - are hardly as adventurous or brave as seafarers, nor are they as hardworking, dedicated, or loyal as simple farmers...
Broh, China savings rate is on average 46%!!!
No, its not only the emigrants, they are financially disciplined and organized
Source: I lived there
I also enjoyed and took a lot away from the book. But it seems like, from a political economy point of view, that doing all the things it recommends is really demanding of the government and while those recommendations can work spectacularly well if followed most countries just can't succeed in pulling it off and would be better off with the comparatively simple free market approach.
I agree very much with that point—that’s a lot of political capital and a lot of sunk cost if for some reason it turns out the world doesn’t really need a new car company
I think that would require some evidence that it is possible for any country to pull off the "comparatively simple" free market approach. It looks like the UK, and maybe Hong Kong and Singapore, did this. But all other developed countries went through a phase of tariffs and export replacement and so on.
I think the UK had a pretty good excuse for not having tarrifs
They had the Corn Laws.