A few centuries ago, the ratio between the per capita income of the richest country and poorest country was maybe five to one. Today it is maybe one hundred to one.
The classic example of economic catch-up is given by East Asia in the mid-twentieth century, starting with Japan. In those days it was possible to obtain near-parity with the West in about thirty to thirty-five years. In other words, as a young man you could see near-parity before you retired and you could see near-parity for your grandchildren. You could see your children making it halfway there, even before they are entering the workforce.
What if, in the future, for the remaining poor countries, the West (and East Asia) is so rich that catch-up takes seventy years? One hundred years? Will any poor country be bothered? Won't it all seem too far off to be worth the trouble? (Catch-up growth takes lots of hard work and savings and sacrifices of previous social norms.) Or do you believe in a technology-transfer Solow model where the maximum possible rate of catch-up growth keeps on growing? One hundred years from now, will it be plausible to imagine catch-up growth of twenty or thirty percent a year?
Hasn’t catching up gotten easier as time has gone by? I mean, Britain took two hundred years to get to where Korea got to in 30.
Doesn’t this question assume that people are entirely disinterested in absolute growth? How many people would be so upset at the thought of their children not reaching parity with the Western world that they would throw a sulk and refuse to invest in anything that would improve their children’s absolute living standards? There probably are some people who are so pathologically twisted that they would do this, but whole countries’ worth? Seems doubtful.
Plus, why should catch-up time be related to the relative scales of incomes? A lot of the difference between the UK now and the UK 100 years ago in terms of per capita income appears to be due to the discovery of new knowledge, eg antibiotics so you don’t die of an infected scratch. Tractors on farms rather than horses. Cellphones. Central bank independence. Once you’ve gotten the economic and political institutions right for growth, there’s no need to retrace all of the UK’s steps faithfully. We have already seen cellphone networks built in countries with far lower per-capita income than the West had when cellphones were first invented.
So yeah, catch-up growth of 20-30% per year sounds extremely plausible to me, independently of what Solow may think. Let’s turn this around, why does catch-up growth of 20-30% per year seem implausible to you?
GDP ratios are only one way of looking at countries, and I’m not convinced it’s the best way across such vast time and wealth scales. Another way is “X is at stage of development where typical rich countries were Y years ago” thinking. For extremely poor countries life expectancy is a lot better measure of well-being than GDP.
Looking at gapminder, typical rich countries’ life expectancies were 35 in 1800, 45 in 1900, and 65 in 1950.
Not a single country now is anywhere near 1800′s top levels. A handful of small countries ravaged by HIV are below 1900′s top levels. Almost all countries, even those considered really really poor like Bangladesh are above 1950′s top levels.
So if they follow the same path of development, it’s 60 years tops. Much faster rates are plausible, and happen all the time.
And it’s not like there’s any concerned effort to “catch up”, a lot of tech just spills off silently, like antibiotics, computers, Internet, mobile phones etc., and it has extremely big impact on people’s lives.
Unless Humans have significantly diverged from one another in the last 100 years, the potentiality for catch-up-growth seems to be accelerating. In my humble opinion it is not technology, but the consistency of human consciousness.
In todays world, a Hotentot’s grand child can and will graduate from MIT fully confluent at the pinnacle of modernity and socialization. Interact with the elites of any and all societies of the world, and you will be interacting with the equivalent of the Western upper middle class. These are the decision making, influential groups that drive transformation within their societies. Obama’s grandmother was illiterate, not to speak of the socio-economic environment of 19th century Nyanza his great grandmother grew up in.
I don’t mean that as a cultural commentary but rather a statement on how quickly any group can pick up and adopt the “latest and bestest” of what works from other successful human societies. I have witnessed this phenomenon first hand in Africa, and in my experience there is allot going on in under the surface that is not readily apparent to the untrained eye.
One thing to note Tyler, is that convergence is running both ways, with transmission accelerating as quickly as absorption, that is the level of knowledge, information and other outputs from successful human societies, is growing exponentially.
By illustration, Every single one of my rural nephews and nieces in East Africa has a Facebook page, and are regular users of the Internet. How they accomplish this task I am yet to figure out, given the dearth of electricity and Internet access in rural East Africa, yet I have witnessed them have an interesting if rather naive debate on Obama’s healthcare initiative.
I find it implausible that once this generation reaches political dominance in the next two decades, that they will not create and East Africa that resembles the world of the peers they interact and identify with globally.
What the hell.
When did countries acquire anthropomorphic features like giving a damn. And why wouldn’t the individual people in the countries try to better their own conditions.
At least for me, the defining changes in life style in the last 100 years in the rich countries are bigger living spaces farther from your neighbors, and personal transportation. The US exurbs are the extreme case, but the desire for these seem to be global: look at the housing and auto trends in China and India.
These require prodigious energy expenditures. Absent some remarkable developments in the energy field, it seems highly unlikely that there are sufficient resources to allow today’s poorest countries to ever catch up in these areas.
The trouble with this kind of free floating speculation is that it ignores the details of catch up growth. There is an “Anna Karenina” principle (as Jared Diamond called it) at work here: Every advanced country is the same, every primitive country is primitive in its own way. The severest obstacle to modernity is not lack of transportation infrastructure (or some other element of non-human Capital) but the culture of the nation itself. Africa won’t be prosperous until its fertility drops, Islamic countries will remain backward until they free themselves of the medieval encrustations of their religion and so on.
Creative destruction in its most trenchant form is at work here. Japan lost a war, China had a revolution, Korea and Vietnam were ripped apart by war, and all these things made them ready for the profound change to modernity. Once a country, or a critical mass of the people, have decided to take right road, everything can happen very fast. It seems implausible that much more than one generation should be required.
Tyler, this is another social experiment like the post where you used framing to see how civil we would be in a post, right?
Because if this is not something like that, or some sort of April Fool’s joke, then you really need to get a clue. Several other posters have already mentioned it, but I’ll do so as well. People want to improve their lot and their family’s lot in absolute terms, and that is all it takes to motive them to succeed.
With an increasing absence of institutions that create deadweight loss, that is all that is needed for a country’s per capita GDP to start to converge. International relative status is irrelevant as a “motivating” tool for national GDP convergence.
People, I’m just presenting a standard view. Read for instance Wikipedia: “Japan’s international economic relations in the first three decades after World War II were shaped largely by two factors: a relative lack of domestic raw materials and a determination to catch up with the industrial nations of the West.” You don’t have to agree with that, but it’s silly to think I am being silly. Other Asian nations wished to catch up to Japan, or arguably China wished to catch up to Singapore, Hong Kong, etc. and saw that maybe it could.
just in addition to almost unlimited energy scenario , I mentioned above, considering great differential in wealth and abilities of future technologies – there could be imaginged there are persons or institutions who on there own money may do a) turning Sahara into oasis ( cheap water desalinations ) b) provide all settlements with transportation ( say robotic airships ) c) provide every child with computer with courses for all subjects one could wish for school , which will be in accessible and entertaining way ( 3D , some AI ( to replace teacher ) etc ).
this will cost for the initiator – just a portion of his wealth but could spur great changes in life for all those affected.
So with these external ‘shocks’ the rules of play will greatly change.
it is known – that education drives fertility rates down ( example Iran which had a severe drop in fertility in recent years ). Now – in one hundred years a 10 dollar laptop, packed with free educational software, will change all those probs with fertility in easy manageable task.
So anyone expects – that with great opportunity to learn – there will be no change?
Of cause there will be.
The problem is – for now. That those money spent on support to Africa just CANNOT buy all necessary change. But , I think, this won’t last for long and soon there will be money to resolve all their problems.
Are countries really motivated to catch up, or are they motivated to make incremental improvements in their economies?
Chrisare, if a neighboring country is clearly better off, and if enough people from the other country visit it, yes, I think the motivation to “catch up” is present. Once enough people have seen higher quality of life with their own eyes, they will start to believe that it is possible to achieve that themselves.
Czechs have been “catching up” to Germans for the last 20 years; and the Slovenians to the Austrians. Estonians to Finnish. On the other hand, Ukrainians, Moldovans or Macedonians do not seem to have anyone to emulate anywhere close, and the rural country there is horribly stagnant.
There are obvious exceptions like Albania, where a significant percentage of the population has worked in Italy, but it gets no closer to Italy than 10 years ago.
P.: That would not explain growth of smaller nations. Consider also the fact that some of the most-militarized countries in the region (Burma, Laos, North Korea) have the least developed economies.
You can have quite strong military without strong economy – if you turn your people into semi-slaves, and find allies like Russia or China who will supply you with some advanced weapons either in exchange for raw materials, or to poke your “ugly plutocrat” neighbours like South Korea or Thailand with a tip of bayonet, or both.
Of course “catch up” (relative status) matters to people, sometimes more than absolute growth. That’s just human nature. Only a roomful of economists could believe otherwise. I thought that naive faith in rational Homo economicus was a casualty of the recent crash? I guess not.
And sometimes entire countries do decide to go off the rails on a tangent that involves, well, the opposite of catching up or absolute growth. See the Khmer Rouge, the Taliban, China during the Cultural Revolution, North Korea, etc. So if catching up involves not merely adopting alien cultural and economic norms but a greatly extended effort of many generations, it’s a perfectly legitimate question to wonder if more countries won’t look for some other way forward… or backward.
Nor are western countries necessarily immune to this. There are already strong signs of an incipient anti-technology backlash.
Tyler asks a perfectly sensible question. What’s up with all you people anyway?
Yes, catchup can be a powerful motivator. Yet, governments, nations and even whole cultures can be delusional for long periods. What if some countries simply don’t want to catch up, or try and fail repeatedly and finally give up altogether? Eventually they will lose all people who are motivated and capable. This can generate an evolutionary feedback loop in short order (counter-selection). What if this has already happened? Could this be the very cause of the increasing gap?
BTW It is definitely unfair to say that “Africa is relatively worse off for the centuries of exploitation by corporate powers.” while being silent about the fact that many African problems are rooted in overpopulation (unless you consider export of Western life-saving medicine to be a part of the exploitation).
100 years ago, Africa had 9x less population than today. Lagos was a sleepy, 100 000 inhabitant city (today: 15 million!) Even the most developed nations on Earth would collapse under such an extreme population explosion. Imagine the USA with, say, 1,2 billion people.
Second, Soviet ideological and proxy interventions played a great role in destabilizing Africa in the second half of the 20th century. Around 1980, at least 20 African nations had regimes loosely affiliated with the Eastern bloc, with one-party rule and ideologies based on some kind of vulgar collectivism (though in reality, the dictator, and not the oligarchic Party, owned everything). Given that such regimes were able to retard development of previously highly developed nations such as Czechoslovakia or East Germany, what kind of effect could they have had on Africa?
The people seeing this as an issue of individuals in each country wanting to improve their own lot driving growth miss a very important factor; that governments can definitely hinder growth, and may be able to positively drive it beyond what would occur in a purely free market. The individual German’s desire for or capacity to generate greater wealth was probably not much lower in East Germany than in West Germany, but the East German government had priorities other than economic growth, and thus East Germany had quite a lot of catching up to do when the actual gap between the two was fully exposed in 1989.
From a methodologically individualist perspective, Tyler’s question is “what policies should governments (and economic elites) follow to rapidly increase economic growth, and will they bother to do so if the gap between their country and the rich countries seems less surmountable than it is today?”
Anonymous, no one was claiming that relative economic status doesn’t matter to human beings. My claim and those of the others was simply that absolute economic outcomes matter as well as relative status. If you think that people can only care about one thing at a time then you’re in no position to be criticising anyone else for a simplistic view of human nature.
As to whether Tyler’s question was sensible, that’s a matter for discussion. Neither you nor Tyler have made a strong case that catchup is likely to slow down in the future.
Anthony, was it that the East Germans had priorities other than economic growth, or was it that they had a strong priority of economic growth but a really bad model for achieving it? As for West Germany, from Ludwig Erhard’s biography I got the impression he spent a lot of time dealing with other powerful politicians in West Germany who had interests other than economic growth, as well as politicians who had very different ideas about how to achieve it.
Steve Sailer, what you say may be so, but the same was true 50 or 100 years ago, then some countries didn’t catch-up (or in the case of Argentina, even declined relatively) despite the gaps in GDP per capita being smaller then than they are now. So again, this doesn’t provide a reason to believe that catch-up levels will fall as the gap in GDP per caita rises. Your argument is interesting though as a more general point as opposed to relating to Tyler’s question. Perhaps the key driver in catch-up is how the geopolitical ambitions of the rich countries in the world and how much the relatively poor countries feel that they are at risk?
Tracy W – you may be right, but my point doesn’t depend on that. I was pointing out that Tyler’s question makes sense from an individualist perspective, contrary to the many claims otherwise (in earlier comments) made from a naive individualist perspective.
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