The entire essay obsesses over GDP convergence while ignoring that GDP (especially in the West) increasingly measures asset shuffling, imputed rents, and healthcare billing rather than anything humans actually experience. (Healthcare, finance, real estate, and legal services combined are ~40% of US GDP!)
So we've got 3000 words eulogizing a metric that tells you more about financialization than flourishing. Look at life expectancy, infant mortality, or caloric intake and you'll find a more interesting story -- with some poor countries doing very well, and increasingly so, whereas others are on a fairly grim trajectory.
US tourists spend $177B per year abroad. When they spend their money in other countries[0], they surely experience the benefit.
The universal experience of Americans visiting Japan: how is such a developed place so affordable? Then they think Japan must do something exceptionally excellent. But the truth is it feels weirdly affordable because they are spending their American salary there.
Edit to add: point being that a weak correlation, even if it is indisputably real, leaves a lot of room for other factors to be operative when it comes to particular differences.
rank correlation between GDP and life expectancy (child mortality would have been maybe a bit better). uses a 20 year window in both directions per year. bootstraps for 5% and 95% quantiles of the rank correlation.
there looks to be a max around 1992, and steady downhill in correlation since then.
this seems unlikely to be an artifact of the analysis, though 1992 is eerily close to 20 years from the last date. 2013 is the last year where we have at least 15 years total symmetriclaly around the given year to include in the correlation for that year.
I notice that the two most obvious outliers for low GDP high life expectancy countries are North Korea and Syria, and the low GDP low life expectancy outliers are three African petrostates.
My interpretation is that this confirms both points. Yes, petrostates with concentrated wealth, states with dubious truthfulness, and those ravaged by war are all cases where GDP doesn't tell the full story. I'm not sure that tells us GDP is useless when applied to where most HN users live, though.
I didn't say it was useless, just that saying there's a correlation is not a refutation of OP's claim that financialization is an important confounding factor.
More to the point, it looks like you are attempting to identify some of the particular factors that might affect gdp or health outcomes in ways that aren't correlated, and exclude cases where those are the operative factors. Which would provide support for the thesis that there are other operative factors, as suggested by OP.
It’s not cherry-picking. The question is: does GDP correlate with things we care about? In answering that question it makes sense to hold other factors constant. Asians have a longevity advantage in virtually every society where they’re found, so it makes sense to separate out the asian countries. It also makes sense to remove outliers where a single export makes GDP per capita seem artificially large.
Economists are obsessed with numbers even when numbers simply contradicts numbers they aren't familiar with.
Incorporating sociology, for what it's worth would radically change the picture. Do economists travel? And what is a poor country anyway.. Zimbabwe is put on the same table as south east Asian countries..where do geopolitical aspects get into considerations for countries like Cuba or more recently Venezuela or Iran. Do these things even matter.
No surprise economists have lost legitimity for so many. They don't predict or diagnose the economy of the nations they live in, trying to explain what they call the "global south" as some call it is rather arrogant.
What this research may have got right is to nuance what their predecessor had claimed. But that wasn't too hard.
My tip for economists: go live in rural areas in each country you claim to diagnose. Speak to the locals, grand ma can tell you what it cost to get clean water just a few decades ago vs now. Maybe you will start to understand what poverty even means.
Healthcare is far more than just billing. Healthcare is why I didn't have a heart attack (two stents in my heart). It's why I didn't go blind (cataracts). It's stuff that I directly benefit from.
Classic example of economic theory managing to dress up a kind of ahistorical theology as respectable science.
Consider this: if you take 'countries' as given (questionable), and some become rich whereas others remain or become poor, by induction you'd expect those trends to continue. A country that has remained poor for decades is likely to remain poor for decades, etc. "Bad governments" and other conditions that create poverty are not some kind of mean-reverting aberration.
The economists will carry on though, and thanks to their connections with finance and government, their prestige will never truly wink out.
1. It never really seemed to explain WHY poor countries stopped doing better. It just framed it as "sike, they never were getting better!". But the WHY is still missing.
2. The penultimate paragraph present a thesis that China's commodity boom is the main driver behind the "great convergence". This claim is baseless. Just because the commodity boom in China coincide with the great convergence does make one the "product" (verbatim quote) of the other. In fact these two events are structurally connected and there is no simple one-way causation relationship. Other factors like financial deregularization played a vital role in the great convergence but was completely ignored.
3. Some of the evidences (eg. "Dutch disease") are over-generalizations and ignore the differences between nations.
Yes, but also political stability and rule of law. It doesn’t have to be “rule of law” in the sense of liberal democracy. But it has to be reasonably fair and predictable for routine business issues. That’s one thing China has focused a lot on that doesn’t get mentioned much. Apart from politically charged topics or pillars of their industrial policy, you actually can get a relatively fair shake from Chinese courts these days.
This is the standard advice from the World Bank, the IMF, etc., and it does developing countries a huge disservice. South Korea banned the import of foreign cars from 1968 to 1988 while it developed its own automobile industry (Japanese imports were banned until 1998). Now Huyndai Motor Group sells more cars than GM [0]. That firm absolutely could not have survived if exposed to the ravages of the free market during the two decades it took them to learn how to produce cars to a globally competitive level. There are many other examples of protectionism in the developmental success that is South Korea. The idea ("infant industry protection") comes from Alexander Hamilton. The US relied on it heavily, too, in its early history.
If South Korea had followed the standard developmental economists' advice they would still be sewing garments and growing soybeans instead of manufacturing semiconductors, consumer electronics, and appliances (among many other things).
Worth mentioning that Park Chung-hee's "five-year economic development plans"[1] were the centerpiece of Korea's economic development during the 1960-70s, and we can draw direct parallels between that and Stalin's five-year economic plans [2].
"What if it was just China?" is a reasonable guess for many of the dazzling claims of statistical worldwide improvement made by Steven Pinker/Noah Smith and their ilk
But even if "it was just China", it doesn't disprove the core fact that the world is getting better. China is almost 20% of the world by population, and its development has brought hundreds of millions of people out of poverty.
Plus, it might be possible for other countries to emulate China and similarly grow.
That's what always surprised me about the whole concept of BRICS nations. Those countries have more interest in competing with each other to get access to other markets than to work/stick together in any way.
What I don't understand is the concept of NATO or the EU: why would a group of countries willingly band together as "happy vassals," as the Belgian PM put it.
I've seen Pinker's arguments dismantled too. The blog whose post we're commenting on even has a piece dismantling the totally made up GDP numbers coming out of Africa.
Nice article! The upshot is that the boom of Chinese commodity prices in the mid-2010s is what stopped poor countries from catching up. That's a high level answer, but there's more nuance to it. In many places, I firmly believe the poor governance added with unnecessary bureaucracy is how half the countries lose sight on development. The prime example is India and to some extent Brazil.
"Poor governance" tends to be an easy catchall term to shift blame on for economic failures, but reality is, like you said, a lot more nuanced. India's socialist government looks justifiably horrible and inefficient when looked at through a rational economist's glasses, but what many don't realize is that its main priority for most of its existence has been stabilizing regions and preventing balkanization, which it has achieved significantly, sadly having to fall back to political nationalism (another catchall term the author of this article himself uses to push some blame) and socialist federal overreach to achieve it. We tend to be quick to notice failures but God knows how many circumstances we have dodged that were too close to disruptive civil war without recognizing it.
Is it against the rules to say that most of the comments here (at least right now) are drastically missing the point? "Rich countries exploit poor ones!!" - ok, fine, you could argue that's been happening since the beginning of time, doesn't change anything about the conclusions of the article. "The article obsesses over GDP convergence!!" - you can argue GDP is not the perfect metric but the fact is a lot of these poor countries have not been converging on lots of quality of life metrics that matter.
The fundamental thrust of the article is that poor countries only "converged" for a short while due to the Chinese-driven commodity boom, and I think this argument is very compelling. Worse, as history has shown tons of times, commodity booms often end up being bad for a country in the long term because they don't lead to meaningful investments in other productivity-improving endeavors (e.g. Dutch disease that the article mentions).
And I think a subtext of this article is that the economic profession in general has a ton of soul searching to do. Too often economics has depicted rosy outcomes for a host of activities where it has just been flat out wrong. This article goes into detail about how "convergence" almost never happened except for a short "sugar high" driven my Chinese commodity demand. Similarly, I've seen a few mea culpas over the years arguing that the once orthodox view that globalization would be great for everyone failed to take into account how it could contribute to destabilizing democracies as the "economic losers" in rich countries started to demand more political power, one aspect in the rise of populism and some of its dangerous effects.
Economists do a lot of soul searching, it seems, but quite enough to quit being economists.
I wonder if anyone has calculated the economic impact of diverting smart, math-capable thinkers from some other useful pursuit into economics. Surely they’d be more productive as accountants, or car mechanics, or as people who throw bricks through windows in the dead of night.
From the outside it looks like the field is an intellectual circular firing squad that produces little of tangible value.
> the fact is a lot of these poor countries have not been converging on lots of quality of life metrics that matter
What kinds of measurements are you referring to? Because poor countries are absurdly clearly converging since the end of WWII, but only if you don't ignore things like political independence, lack of civil wars, lack of state sponsored terror, or food security.
Those things contribute less to the GDP than fridges that break every 4 years.
Anyway, yes, there is some serious discussion on whether that process has stopped. This article isn't very good, the source it's extending from isn't trying to compare actual wealth, but still something may have happened recently.
And yes, it's probably the culprit everybody suspects, and economists should be louder in recognizing that some of their schools are in fact fraudulent.
Fine, I'll speak plainly, because your original post was exactly backwards. "Economic losers" in rich countries are those who did not benefit from globalization - think of all the hollowed out Rust Belt towns in the US, smaller villages in France that aren't on major train lines, etc. If anything, immigrants are largely economic winners because they are able to change their situation and go where there is more abundant opportunity.
Catch up growth is premised on the assumption that productivity producing innovations diffuse through the world. This assumption is true, of course, but not universally. Many technologies also rely on culture, institutions, human capital.
I assume someone somewhere has a dataset for technology diffusion broken out by country or at least region? Like so[1], but as a table and not limited to just here.
Perhaps that sort of thing could be useful enough to justify the extra bytes?
If the modern right's obsession with "ivory tower academics" was real instead of a stick with which to beat ideas they don't like, the field they'd focus on would be economics, not gender studies. Most of it is astrology for those who like to wear suits. It has been decades since the complexity and chaos factor of the real world has overtaken the ability to make meaningful correlations or predictions in all but the most straightforward cases where one institute (e.g. a central bank) controls everything.
It's made even worse by the great bias towards "everything about globalism and capitalism is obviously fantastic for the world!".
This case is such a prime example of both of the above. Firstly, the one-off China event having such a big impact on its own that general theories are entirely irrelevant. Second, of course
> "Now that those were swept away—they were, he said, merely a “temporary phenomenon”—the catch-up growth that economic theory predicted had finally arrived. Globalization was working; development was succeeding; the gap between rich and poor countries was closing.
It’s a graph of regional GDP per capita as a percentage of the U.S. Latin America was around 40% around 1950, but has declined to around 25% by 2018. Sub-saharan africa has slowly lost ground since 1950. Southeast asia has gone from almost as poor as Africa in 1950 to almost as rich as southern europe (50% of US GDP per capita).
What makes some countries rich and some countries poor? In the modern era, I think political dysfunction explains a lot. Developing countries with neoliberal governments that started out authoritarian (Singapore, Korea, Taiwan) have done well. Countries that can’t maintain a stable government have suffered.
In my home country, they were experiencing 5-6% per capita GDP growth for about 15 years. But then a motley coalition of idealistic students and Islamists overthrew the government. I suspect that will lead to a lengthy period of slow growth, because who wants to invest in a country where people regularly overthrow the government?
This graph just shows the different outcomes from Monroe Doctrine vs. Marshall Plan and other stimulus.
Since the 50's, Europe and select Asian countries received large investments from the US; Latin America received coups supported by CIA and governments that sold out to foreign interests.
The Marshall Plan was a very small amount of money. It was about $150 billion in today’s money, or about 5% of GDP of the recipient nations. The U.S. and its allies spent far more in Iraq for far fewer people. And the U.S. has nothing like that for Singapore, Korea, or Taiwan.
And Monroe Doctrine was primarily in the late 19th and early 20th centuries. That doesn’t explain why Latin America got relatively rich during that period, and then fell behind once most of the intervention stopped.
Also, what counts as “support” is extremely nebulous. Which countries in Latin America had a coup where the U.S. was the but-for cause?
Hasina had gone nuts and was torturing people. I don’t think people are gonna wanna invest in a country where someone like that is in charge plus Adani already has them over a barrel.
China does that and people are fine investing there. Bangladesh isn’t Vermont, you can’t apply the same rules. However many people Hasina killed will pale in comparison to the excess child deaths that will result from interrupting GDP growth.
> Globalization was working; development was succeeding; the gap between rich and poor countries was closing. So there was tremendous reason for optimism about the future.
Even if that had turned out true, so what? The gap between rich and poor countries closing is not the same thing as the gap between the rich and poor closing!
> [...] three factors [...] Capital accumulation is one.
The obvious omission here is well developed in Imperialism, The Highest Stage of Capitalism: it's hard to accumulate capital when all of the productivity growth from foreign "investment" by the rich world is captured by the "investors".
Our current world system is based on exploitation by the powerful on the weak. It has been this way since the dawn of time at many levels. So now, powerful countries take resources from less powerful countries. There are many ways this can be done, so here we are.
Who did Singapore exploit to get rich? Taiwan? Korea?
You could be forgiven for believing that if we didn’t have literal real-world experiments in the 20th century where countries went from dirt poor to rich without doing any of the shit you think makes countries rich.
What’s most offensive about your virtue signaling is that it helps keep people poor. If we had kids in college studying how Lee Kuan Yew systematically made his country rich, instead of studying fucking socialism, you’d save literally millions of lives.
So true. There is a full powerful - weak spectrum. Those not at the top or bottom, in-between ones, turn a blind eye to this and accept it as a harsh reality of nature, enjoying spoils of this chain in the process. Worse, become servile to those above them and ruthless to those below. And as if this were not enough, doors of fashion philanthropy also open up for them!
A huge fraction of that assistance (e.g. the IMF) has been conditioned on opening up their economies to "fair" foreign exploitation. It's not some benevolent gift, generally.
I think that the answer is the death of democracy and the golden age of corruption in poor countries. During the 80-s and early 90-s, the Western world was still trying to defend nascent democracies. It was lampooned by everyone ("Team America: World Police", anyone?) but it _did_ work to some degree.
Around 2000-s the West switched into the "whatever you do, we don't care as long as you stay inside your country" mode. Moreover, the West made it easy to expatriate money. You could earn your fortune in Russia by stealing money from schools via various corrupt schemes, but once you crossed the border of Russia, you instantly became a respected businessman who should be treated with respect.
The last year's Nobel in Economics was awarded to Daron Acemoglu for his work on extractive versus inclusive institutions ("Why Nations Fail"). And the West unwittingly (?) recreated the same conditions that resulted in development gaps during the early colonial era.
And yes, the West is to blame here. Not China. Pretty much nobody in, say, Congo is abusing child labor to get money to emigrate to China. But I bet that quite a few people from Congo now have very nice properties in London.
Outsourcing worked while we didnt have AI to the level we needed
It was always gonna be a temporary stopgap. Sorry, the global community doesnt have enough empathy for humans THAT far away to actually share wealth w them. At least we graduated to having social safety nets within nations.
“Sharing wealth” is an idea that has millions of children’s blood all over it. It’s a recipe for keeping countries poor and backwards, so children die of disease, hunger, and political instability.
When my dad was born in a village in the British Dominion of Pakistan, India/Bangladesh/Pakistan and Singapore were similarly poor. Nehru went to Cambridge and learned about socialism. Lee Kuan Yew went to Cambridge and learned about capitalism and high-trust British people: https://youtu.be/b_6H26fpZp8
The rest is history. Singaporeans now get to stay in their home country, while desis flee to Anglo countries to escape the society Nehru and their grandparents created.
Waiting for Europeans to give you money is a loser mentality, and people peddling that mentality in the name of “empathy” are causing harm. What the third world needs from Europe is the social and political technology that Europe itself used to become rich. That’s what people like LKY understood that so many third world leaders failed to learn.
you most certainly want to watch this one about india since you brought it into the conversation https://www.youtube.com/watch?v=LveXy5VBGUc india is not a poor country anymore
India is a desperately poor country. It has a GDP per capita of under $2,700 annually. That’s poorer than the U.S. was in 1880! Singapore has a GDP per capita thirty times higher. If India had grown as quickly as Singapore since 1965, it would have a GDP per capita of $21,000, higher than Russia or Turkey. As recently as 1990, India was richer per capita than China. Today, China is more than four times richer than India per capita.
Of course if India can maintain the current growth trajectory for another couple of decades, and doesn’t fall into the middle income trap, that will change. But Nehru really fucked us all over. If he hadn’t become infatuated with socialism, India would already be on the precipice of being a developed country.
Of all the comments that are flagged or moderated on here, the fate of this one will be quite telling of the HN community culture. ‘Tech’ brings shame on itself by how it relates to the world and humanity at large
I wish I could reply to the original post, but I can't because it is flagged. But if I could reply, I would say the following:
This post is almost certainly wrong--as in, the existence of Big Foot is more likely.
Take an example like Haiti vs. Dominican Republic, two halves of one island. Haiti at #175 is near the bottom of the list in GDP per person, while DR is #71--above both China and Mexico. And consider that as recently as 1960, both had similar GDP per person.
And of course, there's the famous example of North Korea ($600 GDP per person) vs. South Korea ($50,000+ GDP per person).
If countries can diverge so radically, even though they share very similar land and peoples, it is much more likely that the differences between rich countries and poor countries is due entirely to external factors, like governance and history, and not the IQ of people.
I will grant you that the most oppressive regime in the world does have an impact on GDP in Korea. But DR and Haiti are not the same genetically. Haitians African ancestry is 85% and 95%. In the Dominican Republic is 38% and 40%. So I don't see that as an exception to the rule.
it all muddy and impossible to untangle. probably better not to focus on any one example. but i will say that both countries were basically under US military control through the 1930s, so there are external forces at play. gdp growth rates as trajectories probably say more than snapshots. ultimately I think it's self-evident that some genetic groups are more capable of advanced thinking than others, and that it shows up in development scores. Other factors also matter. All life is equally valuable under God. Some perform better on economics.
> In the past, he said, poor countries were failing to outgrow rich ones because of unfortunate circumstances (“the war, bad policies, and dysfunctional institutions that afflicted developing nations in the mid-20th century”)
Or is it the wealthy exploiting the poor through low wages?
They’re not exploiting them, it is a function of not having really strong safety nets or even UBI.
So a lot of people are desperate to survive and keep a roof over their head.
And technology makes money flow upwards to the rich and corporations.
Soon with AI employment is going to become pity-employment. Make-work jobs. Because people just can’t seem to trust other people to be charge of their own time and have free money. Overton window in USA is not there yet. So capital will find ridiculous ways to exploit labor via the desperation of the masses. Maybe gig economies and race to the bottom for service providers as out-of-work people flood the market with useless crap, who knows.
The entire essay obsesses over GDP convergence while ignoring that GDP (especially in the West) increasingly measures asset shuffling, imputed rents, and healthcare billing rather than anything humans actually experience. (Healthcare, finance, real estate, and legal services combined are ~40% of US GDP!)
So we've got 3000 words eulogizing a metric that tells you more about financialization than flourishing. Look at life expectancy, infant mortality, or caloric intake and you'll find a more interesting story -- with some poor countries doing very well, and increasingly so, whereas others are on a fairly grim trajectory.
US tourists spend $177B per year abroad. When they spend their money in other countries[0], they surely experience the benefit.
The universal experience of Americans visiting Japan: how is such a developed place so affordable? Then they think Japan must do something exceptionally excellent. But the truth is it feels weirdly affordable because they are spending their American salary there.
[0]: https://en.wikipedia.org/wiki/World_Tourism_rankings#:~:text...
And they get the opposite feeling when they pay $30 for a hamburger in Zurich.
-.^(raising eyebrow) Doesn't have to be swiss. There are enough domestic(CONUS) places where you can have the same prices, with ease.
GDP per capita is highly correlated with metrics like infant mortality.
Life expectancy vs GDP per capita: https://ourworldindata.org/grapher/life-expectancy-vs-gdp-pe...
I don't have an R^2, but clear to me that it's far from one.
Likewise for infant mortality rate: https://ourworldindata.org/grapher/child-mortality-gdp-per-c...
Edit to add: point being that a weak correlation, even if it is indisputably real, leaves a lot of room for other factors to be operative when it comes to particular differences.
Couldn't help myself and ran a quick analysis:
https://colab.research.google.com/drive/1tstVoKkVP_8B7dTOofa...
nice plot at the bottom.
rank correlation between GDP and life expectancy (child mortality would have been maybe a bit better). uses a 20 year window in both directions per year. bootstraps for 5% and 95% quantiles of the rank correlation.
there looks to be a max around 1992, and steady downhill in correlation since then.
this seems unlikely to be an artifact of the analysis, though 1992 is eerily close to 20 years from the last date. 2013 is the last year where we have at least 15 years total symmetriclaly around the given year to include in the correlation for that year.
I notice that the two most obvious outliers for low GDP high life expectancy countries are North Korea and Syria, and the low GDP low life expectancy outliers are three African petrostates.
My interpretation is that this confirms both points. Yes, petrostates with concentrated wealth, states with dubious truthfulness, and those ravaged by war are all cases where GDP doesn't tell the full story. I'm not sure that tells us GDP is useless when applied to where most HN users live, though.
I didn't say it was useless, just that saying there's a correlation is not a refutation of OP's claim that financialization is an important confounding factor.
What does it look like if you separate out east asians and remove countries with an inflated GDP per capita from resource exports (like Botswana)?
It looks like cherry picking.
More to the point, it looks like you are attempting to identify some of the particular factors that might affect gdp or health outcomes in ways that aren't correlated, and exclude cases where those are the operative factors. Which would provide support for the thesis that there are other operative factors, as suggested by OP.
It’s not cherry-picking. The question is: does GDP correlate with things we care about? In answering that question it makes sense to hold other factors constant. Asians have a longevity advantage in virtually every society where they’re found, so it makes sense to separate out the asian countries. It also makes sense to remove outliers where a single export makes GDP per capita seem artificially large.
Which makes it even more interesting when the two highly correlated metrics are moving in different directions relatively.
Though if you use us as a data point, seems like it goes down if you get too high
Economists are obsessed with numbers even when numbers simply contradicts numbers they aren't familiar with.
Incorporating sociology, for what it's worth would radically change the picture. Do economists travel? And what is a poor country anyway.. Zimbabwe is put on the same table as south east Asian countries..where do geopolitical aspects get into considerations for countries like Cuba or more recently Venezuela or Iran. Do these things even matter.
No surprise economists have lost legitimity for so many. They don't predict or diagnose the economy of the nations they live in, trying to explain what they call the "global south" as some call it is rather arrogant.
What this research may have got right is to nuance what their predecessor had claimed. But that wasn't too hard.
My tip for economists: go live in rural areas in each country you claim to diagnose. Speak to the locals, grand ma can tell you what it cost to get clean water just a few decades ago vs now. Maybe you will start to understand what poverty even means.
What's your point on Zimbabwe being put on the same table as south east Asian countries?
"Healthcare, finance, real estate, and legal services combined are ~40% of US GDP!"
Healthcare is more properly medical care. There's very little health care or wellness preservation compared to treatment and repair.
I would argue that legal services are more care-like, but there is a fair amount of treatment and repair.
Healthcare is far more than just billing. Healthcare is why I didn't have a heart attack (two stents in my heart). It's why I didn't go blind (cataracts). It's stuff that I directly benefit from.
Classic example of economic theory managing to dress up a kind of ahistorical theology as respectable science.
Consider this: if you take 'countries' as given (questionable), and some become rich whereas others remain or become poor, by induction you'd expect those trends to continue. A country that has remained poor for decades is likely to remain poor for decades, etc. "Bad governments" and other conditions that create poverty are not some kind of mean-reverting aberration.
The economists will carry on though, and thanks to their connections with finance and government, their prestige will never truly wink out.
Reasons this piece is unimpressive:
1. It never really seemed to explain WHY poor countries stopped doing better. It just framed it as "sike, they never were getting better!". But the WHY is still missing.
2. The penultimate paragraph present a thesis that China's commodity boom is the main driver behind the "great convergence". This claim is baseless. Just because the commodity boom in China coincide with the great convergence does make one the "product" (verbatim quote) of the other. In fact these two events are structurally connected and there is no simple one-way causation relationship. Other factors like financial deregularization played a vital role in the great convergence but was completely ignored.
3. Some of the evidences (eg. "Dutch disease") are over-generalizations and ignore the differences between nations.
A long essay, which ignored the elephant in the room.
Prosperity and growth come from free markets. The correlation is very strong. Poor countries are poor because they eschew free markets.
Yes, but also political stability and rule of law. It doesn’t have to be “rule of law” in the sense of liberal democracy. But it has to be reasonably fair and predictable for routine business issues. That’s one thing China has focused a lot on that doesn’t get mentioned much. Apart from politically charged topics or pillars of their industrial policy, you actually can get a relatively fair shake from Chinese courts these days.
Political stability and rule of law are essential ingredients for free markets.
This is the standard advice from the World Bank, the IMF, etc., and it does developing countries a huge disservice. South Korea banned the import of foreign cars from 1968 to 1988 while it developed its own automobile industry (Japanese imports were banned until 1998). Now Huyndai Motor Group sells more cars than GM [0]. That firm absolutely could not have survived if exposed to the ravages of the free market during the two decades it took them to learn how to produce cars to a globally competitive level. There are many other examples of protectionism in the developmental success that is South Korea. The idea ("infant industry protection") comes from Alexander Hamilton. The US relied on it heavily, too, in its early history.
If South Korea had followed the standard developmental economists' advice they would still be sewing garments and growing soybeans instead of manufacturing semiconductors, consumer electronics, and appliances (among many other things).
[0] https://statranker.org/economy/leading-global-car-manufactur...
In 1965, Hong Kong tired of being poor and switched to free markets. Their prosperity boomed.
The only consistent correlation with prosperity is free markets.
Worth mentioning that Park Chung-hee's "five-year economic development plans"[1] were the centerpiece of Korea's economic development during the 1960-70s, and we can draw direct parallels between that and Stalin's five-year economic plans [2].
[1] https://en.wikipedia.org/wiki/Five-Year_Plans_of_South_Korea
[2] https://en.wikipedia.org/wiki/Five-year_plans_of_the_Soviet_...
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"What if it was just China?" is a reasonable guess for many of the dazzling claims of statistical worldwide improvement made by Steven Pinker/Noah Smith and their ilk
But even if "it was just China", it doesn't disprove the core fact that the world is getting better. China is almost 20% of the world by population, and its development has brought hundreds of millions of people out of poverty.
Plus, it might be possible for other countries to emulate China and similarly grow.
Yes, typically what this would disprove is the thesis that neoliberal economics are what have led to the decline in global poverty
Maybe--I'm no expert.
But I'm pretty sure that neoliberal economics--particularly free trade--are what allowed China to rise so spectacularly.
That's what always surprised me about the whole concept of BRICS nations. Those countries have more interest in competing with each other to get access to other markets than to work/stick together in any way.
What I don't understand is the concept of NATO or the EU: why would a group of countries willingly band together as "happy vassals," as the Belgian PM put it.
> Those countries have more interest in competing with each other to get access to other markets than to work/stick together in any way.
Access to markets isn't an exclusive asset. They don't compete over it, and mostly they can't compete over it, because they already have it.
Debunked by Steven Pinker:
https://whyevolutionistrue.com/2019/01/31/is-the-world-reall...
Debunked by Jason Hickel:
https://www.jasonhickel.org/blog/2019/2/3/pinker-and-global-...
Hickel's thoughts on this matter were torn to shreds on HN back in 2019, I'm not going to relitigate it now.
I've seen Pinker's arguments dismantled too. The blog whose post we're commenting on even has a piece dismantling the totally made up GDP numbers coming out of Africa.
Nice article! The upshot is that the boom of Chinese commodity prices in the mid-2010s is what stopped poor countries from catching up. That's a high level answer, but there's more nuance to it. In many places, I firmly believe the poor governance added with unnecessary bureaucracy is how half the countries lose sight on development. The prime example is India and to some extent Brazil.
"Poor governance" tends to be an easy catchall term to shift blame on for economic failures, but reality is, like you said, a lot more nuanced. India's socialist government looks justifiably horrible and inefficient when looked at through a rational economist's glasses, but what many don't realize is that its main priority for most of its existence has been stabilizing regions and preventing balkanization, which it has achieved significantly, sadly having to fall back to political nationalism (another catchall term the author of this article himself uses to push some blame) and socialist federal overreach to achieve it. We tend to be quick to notice failures but God knows how many circumstances we have dodged that were too close to disruptive civil war without recognizing it.
Is it against the rules to say that most of the comments here (at least right now) are drastically missing the point? "Rich countries exploit poor ones!!" - ok, fine, you could argue that's been happening since the beginning of time, doesn't change anything about the conclusions of the article. "The article obsesses over GDP convergence!!" - you can argue GDP is not the perfect metric but the fact is a lot of these poor countries have not been converging on lots of quality of life metrics that matter.
The fundamental thrust of the article is that poor countries only "converged" for a short while due to the Chinese-driven commodity boom, and I think this argument is very compelling. Worse, as history has shown tons of times, commodity booms often end up being bad for a country in the long term because they don't lead to meaningful investments in other productivity-improving endeavors (e.g. Dutch disease that the article mentions).
And I think a subtext of this article is that the economic profession in general has a ton of soul searching to do. Too often economics has depicted rosy outcomes for a host of activities where it has just been flat out wrong. This article goes into detail about how "convergence" almost never happened except for a short "sugar high" driven my Chinese commodity demand. Similarly, I've seen a few mea culpas over the years arguing that the once orthodox view that globalization would be great for everyone failed to take into account how it could contribute to destabilizing democracies as the "economic losers" in rich countries started to demand more political power, one aspect in the rise of populism and some of its dangerous effects.
Economists do a lot of soul searching, it seems, but quite enough to quit being economists.
I wonder if anyone has calculated the economic impact of diverting smart, math-capable thinkers from some other useful pursuit into economics. Surely they’d be more productive as accountants, or car mechanics, or as people who throw bricks through windows in the dead of night.
From the outside it looks like the field is an intellectual circular firing squad that produces little of tangible value.
> the fact is a lot of these poor countries have not been converging on lots of quality of life metrics that matter
What kinds of measurements are you referring to? Because poor countries are absurdly clearly converging since the end of WWII, but only if you don't ignore things like political independence, lack of civil wars, lack of state sponsored terror, or food security.
Those things contribute less to the GDP than fridges that break every 4 years.
Anyway, yes, there is some serious discussion on whether that process has stopped. This article isn't very good, the source it's extending from isn't trying to compare actual wealth, but still something may have happened recently.
And yes, it's probably the culprit everybody suspects, and economists should be louder in recognizing that some of their schools are in fact fraudulent.
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Here, you dropped your dog whistle.
are we allowed to speak plainly about these matters?
Fine, I'll speak plainly, because your original post was exactly backwards. "Economic losers" in rich countries are those who did not benefit from globalization - think of all the hollowed out Rust Belt towns in the US, smaller villages in France that aren't on major train lines, etc. If anything, immigrants are largely economic winners because they are able to change their situation and go where there is more abundant opportunity.
Catch up growth is premised on the assumption that productivity producing innovations diffuse through the world. This assumption is true, of course, but not universally. Many technologies also rely on culture, institutions, human capital.
I assume someone somewhere has a dataset for technology diffusion broken out by country or at least region? Like so[1], but as a table and not limited to just here.
Perhaps that sort of thing could be useful enough to justify the extra bytes?
[1] https://techliberation.com/2009/05/28/on-measuring-technolog...
If the modern right's obsession with "ivory tower academics" was real instead of a stick with which to beat ideas they don't like, the field they'd focus on would be economics, not gender studies. Most of it is astrology for those who like to wear suits. It has been decades since the complexity and chaos factor of the real world has overtaken the ability to make meaningful correlations or predictions in all but the most straightforward cases where one institute (e.g. a central bank) controls everything.
It's made even worse by the great bias towards "everything about globalism and capitalism is obviously fantastic for the world!".
This case is such a prime example of both of the above. Firstly, the one-off China event having such a big impact on its own that general theories are entirely irrelevant. Second, of course
> "Now that those were swept away—they were, he said, merely a “temporary phenomenon”—the catch-up growth that economic theory predicted had finally arrived. Globalization was working; development was succeeding; the gap between rich and poor countries was closing.
Everything useful about economics was figured out ages ago. Free markets and the rule of law guarantee wealth and prosperity for the masses
Social sciences departments around the world should be working overtime to explain the first chart on this page: https://www.gisreportsonline.com/r/latin-america-economic-gr...
It’s a graph of regional GDP per capita as a percentage of the U.S. Latin America was around 40% around 1950, but has declined to around 25% by 2018. Sub-saharan africa has slowly lost ground since 1950. Southeast asia has gone from almost as poor as Africa in 1950 to almost as rich as southern europe (50% of US GDP per capita).
What makes some countries rich and some countries poor? In the modern era, I think political dysfunction explains a lot. Developing countries with neoliberal governments that started out authoritarian (Singapore, Korea, Taiwan) have done well. Countries that can’t maintain a stable government have suffered.
In my home country, they were experiencing 5-6% per capita GDP growth for about 15 years. But then a motley coalition of idealistic students and Islamists overthrew the government. I suspect that will lead to a lengthy period of slow growth, because who wants to invest in a country where people regularly overthrow the government?
Why would anyone waste their time dialoguing with anyone who can't label their x and y axes and provide their data sources in csv form>
This graph just shows the different outcomes from Monroe Doctrine vs. Marshall Plan and other stimulus.
Since the 50's, Europe and select Asian countries received large investments from the US; Latin America received coups supported by CIA and governments that sold out to foreign interests.
The Marshall Plan was a very small amount of money. It was about $150 billion in today’s money, or about 5% of GDP of the recipient nations. The U.S. and its allies spent far more in Iraq for far fewer people. And the U.S. has nothing like that for Singapore, Korea, or Taiwan.
And Monroe Doctrine was primarily in the late 19th and early 20th centuries. That doesn’t explain why Latin America got relatively rich during that period, and then fell behind once most of the intervention stopped.
Also, what counts as “support” is extremely nebulous. Which countries in Latin America had a coup where the U.S. was the but-for cause?
> The owner of this website (www.gisreportsonline.com) does not allow hotlinking to that resource
Sorry, coy “in my country” posting is one of my biggest online pet peeves. Why not just say that you mean Bangladesh?
I just say it so it doesn’t seem like I’m cherry picking a random example.
Hasina had gone nuts and was torturing people. I don’t think people are gonna wanna invest in a country where someone like that is in charge plus Adani already has them over a barrel.
China does that and people are fine investing there. Bangladesh isn’t Vermont, you can’t apply the same rules. However many people Hasina killed will pale in comparison to the excess child deaths that will result from interrupting GDP growth.
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> Globalization was working; development was succeeding; the gap between rich and poor countries was closing. So there was tremendous reason for optimism about the future.
Even if that had turned out true, so what? The gap between rich and poor countries closing is not the same thing as the gap between the rich and poor closing!
> [...] three factors [...] Capital accumulation is one.
The obvious omission here is well developed in Imperialism, The Highest Stage of Capitalism: it's hard to accumulate capital when all of the productivity growth from foreign "investment" by the rich world is captured by the "investors".
Our current world system is based on exploitation by the powerful on the weak. It has been this way since the dawn of time at many levels. So now, powerful countries take resources from less powerful countries. There are many ways this can be done, so here we are.
Hong Kong, Taiwan, and Japan have very little in the way of resources, but economically they do very well.
Free markets!
I wonder if there is an example of a country that doesn’t have resources, so “powerful countries” cannot “take” them?
Or every country has resources, and weak countries are those that prefer to sell them for cheap rather than work on making use of them?
England, Japan, Singapore, South Korea, Switzerland, and Taiwan, etc. None of them have vast natural resources.
England had coal at the start of the Industrial Revolution.
England adopted free markets which started the IR.
Who did Singapore exploit to get rich? Taiwan? Korea?
You could be forgiven for believing that if we didn’t have literal real-world experiments in the 20th century where countries went from dirt poor to rich without doing any of the shit you think makes countries rich.
What’s most offensive about your virtue signaling is that it helps keep people poor. If we had kids in college studying how Lee Kuan Yew systematically made his country rich, instead of studying fucking socialism, you’d save literally millions of lives.
So true. There is a full powerful - weak spectrum. Those not at the top or bottom, in-between ones, turn a blind eye to this and accept it as a harsh reality of nature, enjoying spoils of this chain in the process. Worse, become servile to those above them and ruthless to those below. And as if this were not enough, doors of fashion philanthropy also open up for them!
what makes a country weak?
this is cope. no continent has received more assistance than Africa. they are the opposite of exploited.
A huge fraction of that assistance (e.g. the IMF) has been conditioned on opening up their economies to "fair" foreign exploitation. It's not some benevolent gift, generally.
There's always an excuse.
I think that the answer is the death of democracy and the golden age of corruption in poor countries. During the 80-s and early 90-s, the Western world was still trying to defend nascent democracies. It was lampooned by everyone ("Team America: World Police", anyone?) but it _did_ work to some degree.
Around 2000-s the West switched into the "whatever you do, we don't care as long as you stay inside your country" mode. Moreover, the West made it easy to expatriate money. You could earn your fortune in Russia by stealing money from schools via various corrupt schemes, but once you crossed the border of Russia, you instantly became a respected businessman who should be treated with respect.
The last year's Nobel in Economics was awarded to Daron Acemoglu for his work on extractive versus inclusive institutions ("Why Nations Fail"). And the West unwittingly (?) recreated the same conditions that resulted in development gaps during the early colonial era.
And yes, the West is to blame here. Not China. Pretty much nobody in, say, Congo is abusing child labor to get money to emigrate to China. But I bet that quite a few people from Congo now have very nice properties in London.
Automation, d’oh
Outsourcing worked while we didnt have AI to the level we needed
It was always gonna be a temporary stopgap. Sorry, the global community doesnt have enough empathy for humans THAT far away to actually share wealth w them. At least we graduated to having social safety nets within nations.
“Sharing wealth” is an idea that has millions of children’s blood all over it. It’s a recipe for keeping countries poor and backwards, so children die of disease, hunger, and political instability.
When my dad was born in a village in the British Dominion of Pakistan, India/Bangladesh/Pakistan and Singapore were similarly poor. Nehru went to Cambridge and learned about socialism. Lee Kuan Yew went to Cambridge and learned about capitalism and high-trust British people: https://youtu.be/b_6H26fpZp8
The rest is history. Singaporeans now get to stay in their home country, while desis flee to Anglo countries to escape the society Nehru and their grandparents created.
Waiting for Europeans to give you money is a loser mentality, and people peddling that mentality in the name of “empathy” are causing harm. What the third world needs from Europe is the social and political technology that Europe itself used to become rich. That’s what people like LKY understood that so many third world leaders failed to learn.
you most certainly want to watch this one about india since you brought it into the conversation https://www.youtube.com/watch?v=LveXy5VBGUc india is not a poor country anymore
India is a desperately poor country. It has a GDP per capita of under $2,700 annually. That’s poorer than the U.S. was in 1880! Singapore has a GDP per capita thirty times higher. If India had grown as quickly as Singapore since 1965, it would have a GDP per capita of $21,000, higher than Russia or Turkey. As recently as 1990, India was richer per capita than China. Today, China is more than four times richer than India per capita.
Of course if India can maintain the current growth trajectory for another couple of decades, and doesn’t fall into the middle income trap, that will change. But Nehru really fucked us all over. If he hadn’t become infatuated with socialism, India would already be on the precipice of being a developed country.
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Of all the comments that are flagged or moderated on here, the fate of this one will be quite telling of the HN community culture. ‘Tech’ brings shame on itself by how it relates to the world and humanity at large
I don't think this comment should be flagged, not because I agree with it, but because:
a) Hiding it does not change minds. On the contrary, hiding it makes it seem like we fear the idea. And fear can give ideas power.
b) Hiding it only protects those who believe this. If it were visible, they might someday grow ashamed of it.
or, hear me out... I'm right.
Now I think you're just trolling. In that case, I'm glad it was flagged.
I agree tech has long been complicit in censorship - shameful.
You may be right but what if IQ is downstream of GDP not the other way around? No dog in this fight, just a philosophical question.
I wish I could reply to the original post, but I can't because it is flagged. But if I could reply, I would say the following:
This post is almost certainly wrong--as in, the existence of Big Foot is more likely.
Take an example like Haiti vs. Dominican Republic, two halves of one island. Haiti at #175 is near the bottom of the list in GDP per person, while DR is #71--above both China and Mexico. And consider that as recently as 1960, both had similar GDP per person.
And of course, there's the famous example of North Korea ($600 GDP per person) vs. South Korea ($50,000+ GDP per person).
If countries can diverge so radically, even though they share very similar land and peoples, it is much more likely that the differences between rich countries and poor countries is due entirely to external factors, like governance and history, and not the IQ of people.
I will grant you that the most oppressive regime in the world does have an impact on GDP in Korea. But DR and Haiti are not the same genetically. Haitians African ancestry is 85% and 95%. In the Dominican Republic is 38% and 40%. So I don't see that as an exception to the rule.
But they were economically equal in 1960 with similar ancestry, so external factors must be the cause.
it all muddy and impossible to untangle. probably better not to focus on any one example. but i will say that both countries were basically under US military control through the 1930s, so there are external forces at play. gdp growth rates as trajectories probably say more than snapshots. ultimately I think it's self-evident that some genetic groups are more capable of advanced thinking than others, and that it shows up in development scores. Other factors also matter. All life is equally valuable under God. Some perform better on economics.
The existing data leans heavily against "IQ is just downstream of GDP."
> In the past, he said, poor countries were failing to outgrow rich ones because of unfortunate circumstances (“the war, bad policies, and dysfunctional institutions that afflicted developing nations in the mid-20th century”)
Or is it the wealthy exploiting the poor through low wages?
They’re not exploiting them, it is a function of not having really strong safety nets or even UBI.
So a lot of people are desperate to survive and keep a roof over their head.
And technology makes money flow upwards to the rich and corporations.
Soon with AI employment is going to become pity-employment. Make-work jobs. Because people just can’t seem to trust other people to be charge of their own time and have free money. Overton window in USA is not there yet. So capital will find ridiculous ways to exploit labor via the desperation of the masses. Maybe gig economies and race to the bottom for service providers as out-of-work people flood the market with useless crap, who knows.