“China, for example, is the major success story in reducing the number of people in absolute poverty,”

Yes, yes it is.

“Seemingly intractable poverty can actually be overcome remarkably quickly.”

Yes, quite.

An interesting little economic statistic. GDP per capita in China in 1978 was around $1,000. This compares, roughly, to the UK in 1600 AD (yes, of course these numbers are inflation adjusted).

Today it’s around the $7,000, $8,000 level. This equates to the UK in 1948.

They’ve crammed three and a half centuries of economic development into only 35 years. Part of this, of course, is that they are playing catch up. Always a great deal easier than moving the technological frontier itself.

The rest of it is moving from a planned system to a rather more free market one (and believe me, actually the existing Chinese economy is a great deal more free market, warts and all, than the current UK one) plus globalisation.

You know, that neoliberal stuff. More markets, more trade and see the economy grow like gangbusters.

Which leads to an intersting question. Given that this is indeed how the Chinese economy has grown, and given that large numbers of people do insist that they’d like other economies to also so grow, from the UK to sub-Saharan Africa, why is it that people aren’t advocating the same policies, that neoliberalism, that made the Chinese economy grow?

I have a gut feeling that Nobel laureate W Arthur Lewis’s classic paper on: Economic Development with Unlimited Supplies of Labour (1954) is still relevant to many cases of promoting economic development in poor countries:

https://webspace.utexas.edu/hcleaver/www/368/368lewistable.pdf

BoB B

yep. here is a recent paper by Rodrik very much in that tradition.

usually people in the development world are at pains to deny a one-size-fits-all approach. What is gained by developing a campaign that tries to encompass the problems of rural poverty in Angola with unemployment in Aberdeen?

what is this idea that “the economic issues facing emerging and developing countries as qualitatively different … is less relevant” based upon?

Maybe we need fewer intellectuals each arguing we need “a new model of development” and more people focused on boring technocratic issues.

Luis

Thanks for a link to that recent paper by Rodrik – which I didn’t know of.

Of course, there are many structural differences contributing to unemployment in Aberdeen or Angola, just as there are many differences between, say, Aberdeen and the North East region in England or between Angola and other African countries so we need to refer to that substantial literature on: “the Resource curse”

“Africa’s mineral wealth hardly denting poverty levels, says World Bank – Report finds discovery of oil and mineral resources doing little to improve prospects for poor people, whose lot may even worsen” [Guardian 5 October 2012]

One crucial question to put is whether national economic growth is demand or supply constrained. If the constraint is on the supply side then boosting demand will generate inflation rather than real output and jobs.

A hugely significant change since Lewis wrote his paper (in 1954) is the advent of new communications technologies. Europe and North America invested the equivalent of billions in the early part of the last century in laying down fixed links for national telecommunications infrastructures. With mobile telephones, that investment won’t be necessary in Africa. Introducing mobile phones will bring the opportunity of instant news about trading opportunities in the next village or township which would have taken days or even weeks before.

“Europe and North America invested the equivalent of billions in the early part of the last century in laying down fixed links for national telecommunications infrastructures. With mobile telephones, that investment won’t be necessary in Africa.”

And what’s more important: not having to lay (so much) cables for telecommunications infrastructure enable the people in these countries to actually use the services, instead of paying bribes to bureaucrats to be allowed to lay the cables.

In many countries in Africa, getting a fixed line telephone used to take years, even decades. Not because laying cable itself there is any more difficult than elsewhere. But because the cable laying needs licenses and permits, and that gives planned economies a stranglehold on private individuals and businesses who need telephones.

Yes, mobile networks also need licenses and permits, but fewer of them per subscriber – once you have an operational mobile phone network in an area, the marginal cost of adding one subscriber is next to nothing.

Technology solving social problems.

The solutions aren’t necessarily technological.

For non-economists, the notion of a natural resource endowment becoming “a curse” may seem rather paradoxical but discovery of scarce natural resources can lead to the creation of a dual economy in which affluence prevails in one narrow enclave, where the resource is extracted and exported, existing alongside entrenched relative poverty in the rest of the national economy.

One reason why this happens is that exporting the resource can lead to a substantial appreciation of the national currency in the foreign exchange markets which renders parts of the economy disengaged from the exportable natural resource becoming uncompetitive in international trade. Those parts may previously have engaged in international trade then tend to shrink.

One early insight into this situation was gained in the Netherlands in the 1960s and 1970s from the discovery of substantial natural gas reserves off the Dutch coast – hence an early name for “resource curse” was the “Dutch disease”:
http://en.wikipedia.org/wiki/Dutch_disease

Adjustment in the Netherlands was achieved by maintaining a national consensus constraining wage increases: ” . . the reduction in wage growth after 1973 – even to less than 1 per cent a year during the 1980s – is quite remarkable, although it should be added that between 1990 and 1992 real wages again rose by 3 to 4 per cent a year.”

The result was that the annual increase in unit labour costs 1979-90 was kept down to 0.6 per cent, in marked contrast to what happened elsewhere in western Europe at this time. Try the review of the Netherlands economy by Bart van Ark and colleagues in Nicholas Crafts and Gianni Toniolo (eds): Economic Growth in Europe since 1945 (CUP, 1996) chp. 10 p.297.

Compare what happened here in the early 1980s as the British economy became a net oil exporter because of North Sea Oil – large swathes of manufacturing industry became uncompetitive as the Pound appreciated.

IMO it is a mistake to believe that a different kind of economics apply to developing countries.

Some developing countries – such as Nigeria – have been badly afflicted by the “resource curse” but it is worth recalling that some natural resource poor countries – such as Japan, South Korea and Taiwan – managed to overcome their disadvantage very well from relatively impoverished beginnings.

It is worth looking into how they managed that since WW2 and also as to how resource rich countries – such as the Netherlands, Australia and Qatar – managed to successfully adjust to the downstream consequences of their natural resource endowments.