(1959) infamously put forth a five-stage theory of economic development, extrapolating from the experiences of the great industrialized nations. However, as dependency theories strongly pointed out, the conditions under which those countries industrialized is significantly different from those that prevailed after decolonization. In addition to this, democratic capitalism experiences turbulence, which I argue makes development under this global system a struggle against powers and against what I call 鈥淏urawoyan Cycles鈥�.Read More »
Category: Economic History
Historicising the Aid Debate: South Korea as a Successful Aid Recipient
鈥楾he principal enemy is orthodoxy: to use the same recipe, administer the same therapy, to resolve the most various types of problems; never to admit complexity and try to reduce it as much as possible, while ignoring that things are always more complicated in reality.
Albert O. Hirschman (1998:110)
It鈥檚 clear from last week鈥檚 blog posts by Duncan Green that he is tired of academic critique against aid which have not been translated into concrete solutions (see and ). However, the problem with his approach to addressing very complex problems is that it leads to reductive debates which are more symptomatic of the problem than constructive ways of finding solutions. Following Pablo Yanguas鈥� of research approaches I thought of taking a step back and analyzing the case of a successful aid recipient, South Korea. 聽I do this in hope of moving away from the 鈥榣iterature鈥� – which Duncan finds overbearing – as well as getting away from the linearity of the contemporary monitoring and evaluation approach used by the aid sector. Read More »
Africa: Time to Rediscover the Economics of Population Density and Development
叠测听Erik Reinert听补苍诲听Richard Itaman.
At the OECD鈥檚 origin, we find the 1947 Marshall Plan that re-industrialised a war-torn Europe. At the very core of the Marshall Plan was a profound understanding of the relationship between a nation鈥檚 economic structure and its carrying capacity in terms of population density. We argue that it is necessary to rediscover this theoretical understanding now, in the mutual interest of Africa and Europe.Read More »
How History Matters in Post-Socialist Economies
Though it has been suggested that 鈥� it was in the early 1991 that captured the minds of the new generation of Eastern Europe (EE) and the Former Soviet Union (FSU).
The promise of more open societies following Mikhail 骋辞谤产补肠丑别惫鈥檚 perestroika announcement set in motion powerful dynamics completely transforming the world. The Berlin Wall fell in 1989 and by the end of 1991 the Soviet Union disintegrated bringing down the entire socialist institutional edifice. Newly independent nation-states emerged across Europe, the Caucasus, and Central Asia. This new 鈥渨ind鈥� was that of hope, progressive stability and economic prosperity, or so it seemed at the time. And yet, 鈥淸蹿]or whom the wall fell?鈥� , is not as straightforward as might have been expected.
Despite the independence premium in national policy and in parallel with the post-socialist economies are yet to achieve the ideals announced at the outset of market reforms. Ironically, the most unfortunate economic plan was the 1990s script of transition from planned economy to free market in the EE and FSU.
Increasing and Diminishing Returns 鈥� Africa鈥檚 Opportunity to Develop
鈥楾his tendency to Diminishing Returns was the cause of Abraham鈥檚 parting from Lot, and of most of the migrations of which history tells鈥� wrote the founder of neo-classical economics, Alfred Marshall, in the first edition of his textbook (1890). In a footnote he refers to the Bible鈥檚 Genesis xiii : 6: 鈥楢nd the land was not able to bear them that they might dwell together; for their substance was great so they could not dwell together鈥�. (Marshall 1890: 201)
Marshall鈥檚 observation also applies to today鈥檚 migration patterns: from countries where most activities are subject to constant or diminishing returns to countries whose key economic activities are subject to increasing returns to scale. Diminishing returns occur when one factor of production is limited by nature, which means that it occurs in agriculture, mining, and fisheries. Normally the best land, the best ore, and the richest fishing grounds are exploited first, and 鈥� after a point 鈥� the more a country specialises in these activities, the poorer it gets. OECD () shows how this occurs in Chilean copper mining: every ton of copper is produced with a higher cost than the previous ton.
In Alfred Marshall鈥檚 theory, the 鈥楲aw of Diminishing Returns鈥� is juxtaposed with 鈥楾he Law of Increasing Returns鈥�, also called economies of scale. Here we find the opposite phenomenon; the larger the volume of production, the cheaper the next unit of production becomes. Traditionally economies of scale were mainly found in manufacturing industry, and increasing returns combined with technological change has for centuries been the main driving force of economic growth. Increasing returns creates imperfect competition, market power and large barriers to entry for challengers 鈥� companies or nations 鈥� making it difficult for them to enter these industries. In contrast to the rents produced under conditions of increasing returns, raw materials 鈥� commodities 鈥� on the other hand, are subject to perfect markets, and productivity improvements spread as lowered prices. This is the essence of the theory which explains why former World Bank Chief Economist Justin Yifu Lin was correct hen he asserted that 鈥楨xcept for a few oil-exporting countries, no countries have ever gotten rich without industrialization first鈥� ( : 350).Read More »
What is missing in the 鈥�33 Theses for an Economics Reformation鈥�
By Erik Reinert (Talinn University of Technology) and (Universitat Oberta de Catalunya)
On the occasion of the 500th anniversary of Martin Luther鈥檚 Reformation, were formulated by Rethinking Economics and the New Weather Institute. The document was symbolically nailed to the door of the London School of Economics In December 2017 and , and was supported by an impressive list of over 60 leading academics and policy experts. The initiative offers a rare and most welcome refreshing message from the House of Economics.
Several elements in the theses are long overdue 鈥� for example, the existence of planetary limits, the superiority of political deliberation over economic logic, the appreciation of the role of uncertainty in economic predictions, the non-independence of facts and values when economic thoughts are formulated, the warning against over-reliance on modelling, econometrics and formal methods. Also important is the indication that both growth and innovation need to be conceived with a desirable end in sight, one which can be associated with material and spiritual progress 鈥� rather than with misery, inequity and inequality. It is finally all important that in the teaching of economics itself the history and philosophy of economics should be taught, together with all economic theories: not just the family tree of mainstream economics.Read More »
Pitfalls of the Developmental State: The Fate of the Sudanese Economic Model
I have lately been grappling with the question of how African states came into being, not just as political, but especially economic territorial units. Connected to this are questions of how experts, especially economists came to influence and account for what became national economies. At the center of the state, economy and society are critical question of development and welfare. How did independent African countries make sense of their inheritance and what mechanisms did they deploy to transform themselves into coherent nations of multiple but entangled identities with disparate circumstance but common material goals united by the logic of a national economy? As I grappled with these issues, a great new monograph informed by an impressive historiography has arrived. The author grounds his work in an archivally based history of the transformation of the Sudan into an economic unit between the 1940s and the 1960s. 鈥檚 new book: (Cambridge: Cambridge University Press, 2017) is centred on addressing these question using the history of a territory that transformed from being an Anglo-Egyptian Sudan condominium into the independent state of Sudan.Read More »
Not just r > g but r + q >> g: Piketty meets Ricardo in the long run of Indian history
Wealth-income ratios are rising everywhere 鈥� they are not cyclical but rather unambiguously upward trending for the past three decades. Put simply, the accumulation of wealth is outpacing economic growth. This is true in America, Europe and Japan (Piketty and Zucman 2014), as well as China and Russia (Novokmet, Zucman & Yang 2018). , I found this same trend to persist in the world鈥檚 largest democracy – Indian wealth-income ratios have been rising since the 1970s. Why are these trends so similar in countries with such deep structural differences and distinct economic trajectories? By themselves, high wealth-income ratios are not necessarily a social dilemma 鈥� they may imply more wealth for everyone. But in general, there is a tendency for wealth to be more concentrated than income. As a result, a rise in wealth over income tends to increase wealth inequality. in most economies today. Thus, these trends and the mechanisms behind them need to be understood with careful attention.
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