Not as much as you think. Here is Charles Kenny’s closer:
In short, the last six years has not changed the basic conclusion that the growth literature has taught us much less about how to get rich than it has about who is already rich. There is nothing particularly new in recent growth theory, but perhaps that is no surprise because there is remarkably little new in growth, either – the rich today are by and large those who were rich yesterday. That there might not be a holy grail of growth policy, however, is no reason for people of economic faith to stop looking, so no doubt the next six years will see another 13,000 articles on the subject to review.
“..there is remarkably little new in growth.” ? Remarkable conclusion when a greater number of people and a greater proportion of humanity is ceasing to be poor than at any time in history. That might even have a little to do with such exiguous theory as we have developed; but not very much.
When I look at China and India today, I am reminded of the period when the USA – then the richerst and most technically advanced economy in the world – grew at those rates; the Second Woprld War. In 1946/7, sensible economic policy stopped the collapse of demand: but what put the brakes on growth seemed to be that we switched the vested interests back on.
So, to put my long standing hunch about how and when growth occurs in a testable form:
“Economic growth can always be relied upon to gather momentum when three conditions are met:
– there is at least a fair degree of security of person and property,
– there is at least a modest degree of education spread in the population,
– vested interests in the status quo are have relatively little political leverage.”
Throughout most of history, this combination of conditions occurred rarely, and when it did occur usually created vested interests which stopped the process. In the political and social conditions of 18th and 19th century Britain and the USA, enough of those with vested interests also aquired interests in the growth process, so enabling the world to escape from the trap. Nowadays, a major driver of growth is political fear of domination by rich foreign countries. This is the force which has led governments, from Meiji Japan onewards, to suppress the vested interests that could block economic growth. Wherer that suppression is administratively very effective -e.g. in China and Singapore – growth becomes staggering. However, where the growth process is taking root in a political dynamic, as may be happening in India, the ability to avoid blocking by new vested interests may ultimately prove far longer lasting.
I doubt if loss of hegemony over the next 20 or 30 years will give the USA sufficient incentive to suppress its’ burden of vested interests, but it will be interesting to see what effect the threat of Asian world dominance thereafter has on US growth. I suspect it may prove even more stsrtling than the present rates of growth in Asia.
“explaining growth (through) genetic differences….” I disagree. See Gladwell here: http://www.gladwell.com/2007/2007_12_17_c_iq.html, and suggest a reading of Diamond’s “Guns, Germs, and Steel,” which makes a very strong case for national predestination based on natural resources.
I don’t disagree that liberty helps growth, but the cited proof for a connection between race and IQ is deeply flawed. Zimbabwe is simply evidence that Mugabe is corrupt. Claiming that as evidence of black mental inferiority is on par with using Ceauscu’s rule as proof that Romanians are idiots.
I agree with “Diversity”‘s 3 factors.
Assuming those preconditions are met, the main variables that create wealth are time and rate of return on investment. That very small changes in percentage growth result in huge changes over long periods of time could explain the confounding nature of the problem. It is very difficult to discern statistical meaning from very small differences today that will have huge ramifications many years in the future.
The problem is that Mugabe’s government is a stupid government full of stupid people
Mugabe got a Masters in Economics from LSE. Where did you, if any?
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