Category: Late Development

Historicising the Aid Debate: South Korea as a Successful Aid Recipient

Farwa Sial4 Comments

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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 »

Increasing and Diminishing Returns 鈥� Africa鈥檚 Opportunity to Develop

Erik Reinert1 Comment

A drone shot of colorful shipping containers in a shipping terminal

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 »

A Critical Review on the documentary 鈥淧overty, Inc.鈥�

caraballocueto2 Comments

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The documentary 鈥淧overty, Inc.鈥� has become so influential that it is now part of many courses at the university level. The good news is that at universities we apply critical thinking to the information we receive (or we are supposed to). As a development economist, I share here my views on this famous documentary.

On the positive side, the documentary does a good job in making some points for an audience unfamiliar with economic theory, such as the idea that dependency does not end poverty, or that current foreign aid (money flows between governments) has 鈥渦nintended consequences that do more harm than good.鈥� However, both ideas are not new in development studies. The much quoted 鈥渢each a human to fish鈥� is an idea associated with many philosophers, including Maimonides (about 850 years ago). This criticism of the structure of current foreign aid is a relatively old idea in the development literature. Perhaps the best point made by the documentary is the argument that Non-governmental Organizations (NGOs) can do a better job if they base their strategies on effective communications with local entities, although this idea is not new either.

What are, then, the problems with this documentary? Many. Firstly, the development literature has two main perspectives; namely, the conservative and the progressive. A documentary that omits a of argumentation is not responsible and carries 鈥渦nintended consequences,鈥� such as misinforming that unfamiliar audience. Besides mentioning supranational entities, the documentary did not expose crucial structural problems: there is no serious analysis on geopolitics, global power relations, or class issues, among others. A class analysis would not, for instance, focus on stressing that 鈥淣GOs need the poor to exist鈥� but that 鈥渢he rich need the poor to exist鈥�.Read More »

Premature Deindustrialization and its Consequences for Human Welfare

jpellg5 Comments

Seagate_Wuxi_China_Factory_Tour.jpegRecent research suggests that late industrializers have not been following previously observed patterns in terms of sectoral change and employment, but the effect of these changing structural patterns on well-being and the distribution of gains from growth has not yet been systematically examined. There is a global shift towards both lower employment in industry at all levels of income per capita and de-industrialization, the shift from manufacturing to service employment, taking place at significantly lower levels of income (See work by ; ; and Rodrik , and ).

Deindustrialization, Employment Generation, and the 鈥淧recarization鈥� of Global Labor
There are many reasons why these new patterns may have negative effects on inclusive development; emphasizes the important role that periods of high levels of manufacturing employment have played in now wealthy countries, and the dearth of wealthy countries that have skipped such a phase; there are concerns about the effects of lower levels of manufacturing output on both growth and employment generation ( See again and ).Read More »