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Are some countries destined for under-development? - Dr Ha-Joon Chang:


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As part of the Global Development Institute Lecture Series and in collaboration with the Post-Crash Economics Society Dr Ha-Joon Chang, University of Cambridge, delivered a lecture entitled: Are some countries destined for under-development?

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Are some countries destined for under-development? - Dr Ha-Joon Chang:

  1. 1. Are Some Countries Destined for Under-Development? Ha-Joon Chang University of Cambridge Website:
  2. 2. Table 1. Per capita GNP Growth Rates, 1955-80 1955-70 (%) 1970-80 (%) 1955-80 (%) All developing countries 3.1 3.1 3.1 High-income oil exporters 4.7 1.3 3.3 Industrial non- market economies 5.8 2.8 4.6 Industrial market economies 3.6 2.4 3.1 World 3.1 1.9 2.6
  3. 3. Table 2. Per capita GDP Growth Rates, 1980-2016 1980-1990 (%) 1990-2000 (%) 1980-2000 (%) 2000-2010 (%) 2010-2016 (%) 2000-2016 (%) 1980-2016 (%) Low & middle income 1.1 1.4 1.2 4.6 3.4 4.2 2.5 East Asia & Pacific 5.5 6.8 6.2 8.2 6.4 7.5 6.8 Europe & Central Asia n/a -2.3 -2.3 4.8 2.3 3.8 1.3 Latin America & Caribbean -0.6 1.3 0.3 2.0 0.6 1.4 0.8 Middle East & North Africa 0.2 1.3 0.8 2.8 -0.6 1.7 1.2 South Asia 3.1 3.2 3.1 5.3 5.1 5.2 4.1 Sub-Saharan Africa -1.6 -0.6 -1.1 2.9 0.8 2.1 0.3 High income 2.4 2.0 2.2 0.9 1.1 1.0 1.7 World 1.4 1.3 1.3 1.6 1.5 1.5 1.4
  4. 4. ‘Bad Old Days’ 1960-80 (%) ‘Brave New World’ 1980-2010 (%) All Developing Countries 3.0 2.7 Latin America and the Caribbean 3.1 0.8 Sub-Saharan Africa 1.6 0.2 Table 3. Annual per capita GDP growth rates Source: World Bank, United Nation, the IMFs Bad old days & Brave new world
  5. 5. Meta-structural explanations I • Tropical Climate – tropical diseases reduce labour productivity, raise healthcare costs, and reduce animal husbandry yields – tropical soil leads to low agricultural yields – even links to low-quality institutions (Acemoglu) • Geography – landlockedness restricts trade – ‘bad neighbourhood effects’ of being surrounded by poor and conflict-ridden neighbours • Natural Resource Curse – corruption and conflicts – over-valuation of currency – have weak linkages
  6. 6. Meta-structural explanations • Ethnic Diversity – Makes people distrust each other, raising transaction costs – Encourages violent conflicts, especially when there is a medium degrees of ethnic diversity • Low-quality Institutions – favourite explanation for the World Bank and the IMF for their policy failures (‘Governance matters’) – ‘extractive’ institutions from non-settler colonial legacy (Acemoglu) • Bad Culture – Especially the African or the Muslim ones – poor work ethic, profligacy, lack of cooperation, low value put on education, lack of planning
  7. 7. “Undoubtedly, many factors played a role, but … culture had to be a large part of the explanation. South Koreans valued thrift, investment, hard work, education, organisation, and discipline. Ghanaians had different values. In short, cultures count.” Samuel Huntington, the author of Clash of Civilizations, comparing Ghana and South Korea
  8. 8. “The African, anchored in his ancestral culture, is so convinced that the past can only repeat itself that he worries only superficially about the future. However, without a dynamic perception of the future, there is no planning, no foresight, no scenario building; in other words, no policy to affect the course of events.” Daniel Etounga-Manguelle, a Cameroonian businessman, on the Africans in L. Harrison & S. Huntington, Culture Matters (2000)
  9. 9. “African societies are like a football team in which, as a result of personal rivalries and a lack of team spirit, one player will not pass the ball to another out of fear that the latter might score a goal” Daniel Etounga-Manguelle, a Cameroonian businessman, on the Africans in L. Harrison & S. Huntington, Culture Matters (2000)
  10. 10. Meta-structural explanations - criticisms I • Tropical Climate – Frigid, arctic climate as bad as tropical climate – Many rich countries have tropical diseases – The advocates of the climate argument are confusing the cause of underdevelopment with its symptoms • a country’s inability to overcome the constraints imposed by its poor climate is a symptom of under-development.
  11. 11. Is Cold Climate Better? “Those who live in a cold climate and in Europe are full of spirit, but wanting in intelligence and skill; and therefore they retain comparative freedom, but have no political organization, and are incapable of ruling over others. Whereas the natives of Asia are intelligent and inventive, but they are wanting in spirit, and therefore they are always in a state of subjugation and slavery. But the Hellenic race, which is situated between them, is likewise intermediate in character, being high-spirited and also intelligent. Hence it continues free, and is the best governed of any nation, and if it could be formed into one state, would be able to rule the world.” (Aristotle, Politics, Book VII, chapter 7).
  12. 12. Meta-structural explanations - criticisms II • Geography – several rich countries are landlocked (Switzerland, Austria) or seasonally landlocked (Scandinavian countries) – Ethiopia, Rwanda, and Uzbekistan – Once again, confusion between the cause and the symptom • it is the lack of investment in the alternative transport systems, rather than the geography itself, that is the problem – ‘bad neighbourhood effects’ can be overcome by exports (East Asia) – India and Bangladesh also in a ‘bad neighbourhood’.
  13. 13. Meta-structural explanations - criticisms III • Natural Resource Curse – ‘wrong’ measures (share in export or GDP) – ‘endowment’ statistics gives a different picture – Many rich countries have successfully used natural resource abundance as springboards for their economic development (US, Canada, Australia, the Scandinavian countries). – In the late 19th and early 20th century the fastest growing regions of the world were resource-rich areas like North America, Latin America, and Scandinavia.
  14. 14. Meta-structural explanations - criticisms IV • Ethnic Diversity – Many of today’s rich countries in Europe have suffered from ethnic and other (linguistic, religious, and ideological) divides, especially of the ‘medium-degree’ ones (Belgium, Switzerland, Spain, etc.) – East Asia not as homogenous as often thought – Rwanda vs. Tanzania – Rich countries do not suffer from ethnic heterogeneity not because they do not have it but because they have succeeded in building a nation out of a heterogeneous population (which, we should note, was often an unpleasant and even violent process)
  15. 15. Meta-structural explanations – criticisms V • Low-quality Institutions – Institutions – economic development two way causation (the latter stronger in influence: economic development brings about greater demand for higher quality institutions, greater affordability of them, and the agents of change) • Bad Culture – many of today’s rich countries used to be criticized for having those ‘negative’ cultural traits that are supposed to characterise poorly-performing economies today – cultural arguments fail to recognize that the relationship between culture and economic development is complex and that, in the long run, the causality runs far more strongly from economic development to culture
  16. 16. The Germans are a “plodding, easily contented people … endowed neither with great acuteness of perception nor quickness of feeling … It is long before [a German] can be brought to comprehend the bearings of what is new to him, and it is difficult to rouse him to ardour in its pursuit.” John Russell, an English traveller, on the Germans in 1828.
  17. 17. “My impression as to your cheap labour was soon disillusioned when I saw your people at work. No doubt they are lowly paid, but the return is equally so; to see your men at work made me feel that you are a very satisfied easy-going race who reckon time is no object. When I spoke to some managers they informed me that it was impossible to change the habits of national heritage.” An Australian engineer after visiting Japan in 1915
  18. 18. The Koreans are “12 millions of dirty, degraded, sullen, lazy and religionless savages who slouch about in dirty white garments of the most inept kind and who live in filthy mud huts”. Beatrice Webb on the Japanese and the Koreans during her 1911-12 tour of East Asia
  19. 19. Concluding Remarks I • Arguments citing non-policy factors that do not change over time, such as climate and geography (except for rare things like Ethiopia becoming landlocked due to the secession of Eritrea) cannot explain how the economic performances of the countries in question have fluctuated a lot since the Second World War. • The effects of these factors are often characterized in a biased way; for example, only the negative effects of natural resources are discussed, when they can have positive impacts too.
  20. 20. Concluding Remarks II • In the long run, some of the allegedly unalterable ‘meta-structural’ factors are subject to change through human intervention, both directly (nation-building or cultural reform) and indirectly (through economic development, which is subject to policy intervention). • Many of those factors were (and some still are) present in the rich countries – for example, things like hostile climate or disadvantageous geography – but do not matter much any more because those countries have acquired the abilities to deal with them, largely thanks to economic development.