The entire essay obsesses over GDP convergence while ignoring that GDP (especially in the West) increasingly measures asset shuffling, imputed rents, and healthcare billing rather than anything humans actually experience. (Healthcare, finance, real estate, and legal services combined are ~40% of US GDP!)
So we've got 3000 words eulogizing a metric that tells you more about financialization than flourishing. Look at life expectancy, infant mortality, or caloric intake and you'll find a more interesting story -- with some poor countries doing very well, and increasingly so, whereas others are on a fairly grim trajectory.
Economists are obsessed with numbers even when numbers simply contradicts numbers they aren't familiar with.
Incorporating sociology, for what it's worth would radically change the picture. Do economists travel? And what is a poor country anyway.. Zimbabwe is put on the same table as south east Asian countries..where do geopolitical aspects get into considerations for countries like Cuba or more recently Venezuela or Iran. Do these things even matter.
No surprise economists have lost legitimity for so many. They don't predict or diagnose the economy of the nations they live in, trying to explain what they call the "global south" as some call it is rather arrogant.
What this research may have got right is to nuance what their predecessor had claimed. But that wasn't too hard.
My tip for economists: go live in rural areas in each country you claim to diagnose. Speak to the locals, grand ma can tell you what it cost to get clean water just a few decades ago vs now. Maybe you will start to understand what poverty even means.
I don't see how this comment relates to the article, which claims that the observed quick growth in "poor countries" was all just China modernizing. And Chinese growth is indeed correlated with better material conditions for the Chinese.
Our current world system is based on exploitation by the powerful on the weak. It has been this way since the dawn of time at many levels. So now, powerful countries take resources from less powerful countries. There are many ways this can be done, so here we are.
Who did Singapore exploit to get rich? Taiwan? Korea?
You could be forgiven for believing that if we didn’t have literal real-world experiments in the 20th century where countries went from dirt poor to rich without doing any of the shit you think makes countries rich.
What’s most offensive about your virtue signaling is that it helps keep people poor. If we had kids in college studying how Lee Kuan Yew systematically made his country rich, instead of studying fucking socialism, you’d save literally millions of lives.
Korea was propped up by the US due to the Cold and Korea Wars. Taiwan due to the cold War too. Both are still being supported by the US. Singapore was owned by the UK and was ignored left alone due to the fact of its size. So it was able to chart their own course.
> In the past, he said, poor countries were failing to outgrow rich ones because of unfortunate circumstances (“the war, bad policies, and dysfunctional institutions that afflicted developing nations in the mid-20th century”)
Or is it the wealthy exploiting the poor through low wages?
Outsourcing worked while we didnt have AI to the level we needed
It was always gonna be a temporary stopgap. Sorry, the global community doesnt have enough empathy for humans THAT far away to actually share wealth w them. At least we graduated to having social safety nets within nations.
It’s a graph of regional GDP per capita as a percentage of the U.S. Latin America was around 40% around 1950, but has declined to around 25% by 2018. Sub-saharan africa has slowly lost ground since 1950. Southeast asia has gone from almost as poor as Africa in 1950 to almost as rich as southern europe (50% of US GDP per capita).
What makes some countries rich and some countries poor? In the modern era, I think political dysfunction explains a lot. Developing countries with neoliberal governments that started out authoritarian (Singapore, Korea, Taiwan) have done well. Countries that can’t maintain a stable government have suffered.
In my home country, they were experiencing 5-6% per capita GDP growth for about 15 years. But then a motley coalition of idealistic students and Islamists overthrew the government. I suspect that will lead to a lengthy period of slow growth, because who wants to invest in a country where people regularly overthrow the government?
This graph just shows the different outcomes from Monroe Doctrine vs. Marshall Plan and other stimulus.
Since the 50's, Europe and select Asian countries received large investments from the US; Latin America received coups supported by CIA and governments that sold out to foreign interests.
Nice article! The upshot is that the boom of Chinese commodity prices in the mid-2010s is what stopped poor countries from catching up. That's a high level answer, but there's more nuance to it. In many places, I firmly believe the poor governance added with unnecessary bureaucracy is how half the countries lose sight on development. The prime example is India and to some extent Brazil.
"Poor governance" tends to be an easy catchall term to shift blame on for economic failures, but reality is, like you said, a lot more nuanced. India's socialist government looks justifiably horrible and inefficient when looked at through a rational economist's glasses, but what many don't realize is that its main priority for most of its existence has been stabilizing regions and preventing balkanization, which it has achieved significantly, sadly having to fall back to political nationalism (another catchall term the author of this article himself uses to push some blame) and socialist federal overreach to achieve it. We tend to be quick to notice failures but God knows how many circumstances we have dodged that were too close to disruptive civil war without recognizing it.
Brazil is a prime example of what the lack of revolutions ousting old elites create in colonised countries.
There was no revolution for independence which kept the same families of land owners in the elites through it, after there was no revolution to phase out the monarchy in favour of the Republic, and the same entrenched elites managed to keep going since their local power was already settled. All of this is late 19th century.
Push this through the 20th century, and the same elites wanted to keep their power which was mostly based on agriculture production or mining: coffee, sugar cane, cattle, gold, iron ore, manganese. Any divergence of public policy investment away from these was met with hard pushback.
Industrialisation really only started in Brazil in the 1940s, it was rapid and captured by the same groups, just barely 20 odd years into the process the military dictatorship took over power and maintained the process of corporatism into the same elites (since most of those were supportive of the junta). Another 20 years of dictatorship left a corrupt political body, with the amnesty for the junta many members of the dictatorship party went back into normal political life under democratic rule with predictable outcomes to whom they would favour.
There never was a revolution such as land reform to distribute power in rural areas to more people, no industrial revolution to tear down agriculture/extractivism-based elites grip on power, and with corruption there's always the tilting of the scales towards the old elites with deep connections throughout all the layers of the State in new ventures.
Many issues with Brazil's high corruption stem from these roots, "coronelismo" [0] is still present even in large state capital cities.
"What if it was just China?" is a reasonable guess for many of the dazzling claims of statistical worldwide improvement made by Steven Pinker/Noah Smith and their ilk
If the modern right's obsession with "ivory tower academics" was real instead of a stick with which to beat ideas they don't like, the field they'd focus on would be economics, not gender studies. Most of it is astrology for those who like to wear suits. It has been decades since the complexity and chaos factor of the real world has overtaken the ability to make meaningful correlations or predictions in all but the most straightforward cases where one institute (e.g. a central bank) controls everything.
It's made even worse by the great bias towards "everything about globalism and capitalism is obviously fantastic for the world!".
This case is such a prime example of both of the above. Firstly, the one-off China event having such a big impact on its own that general theories are entirely irrelevant. Second, of course
> "Now that those were swept away—they were, he said, merely a “temporary phenomenon”—the catch-up growth that economic theory predicted had finally arrived. Globalization was working; development was succeeding; the gap between rich and poor countries was closing.
Classic example of economic theory managing to dress up a kind of ahistorical theology as respectable science.
Consider this: if you take 'countries' as given (questionable), and some become rich whereas others remain or become poor, by induction you'd expect those trends to continue. A country that has remained poor for decades is likely to remain poor for decades, etc. "Bad governments" and other conditions that create poverty are not some kind of mean-reverting aberration.
The economists will carry on though, and thanks to their connections with finance and government, their prestige will never truly wink out.
Is it against the rules to say that most of the comments here (at least right now) are drastically missing the point? "Rich countries exploit poor ones!!" - ok, fine, you could argue that's been happening since the beginning of time, doesn't change anything about the conclusions of the article. "The article obsesses over GDP convergence!!" - you can argue GDP is not the perfect metric but the fact is a lot of these poor countries have not been converging on lots of quality of life metrics that matter.
The fundamental thrust of the article is that poor countries only "converged" for a short while due to the Chinese-driven commodity boom, and I think this argument is very compelling. Worse, as history has shown tons of times, commodity booms often end up being bad for a country in the long term because they don't lead to meaningful investments in other productivity-improving endeavors (e.g. Dutch disease that the article mentions).
And I think a subtext of this article is that the economic profession in general has a ton of soul searching to do. Too often economics has depicted rosy outcomes for a host of activities where it has just been flat out wrong. This article goes into detail about how "convergence" almost never happened except for a short "sugar high" driven my Chinese commodity demand. Similarly, I've seen a few mea culpas over the years arguing that the once orthodox view that globalization would be great for everyone failed to take into account how it could contribute to destabilizing democracies as the "economic losers" in rich countries started to demand more political power, one aspect in the rise of populism and some of its dangerous effects.
> the fact is a lot of these poor countries have not been converging on lots of quality of life metrics that matter
What kinds of measurements are you referring to? Because poor countries are absurdly clearly converging since the end of WWII, but only if you don't ignore things like political independence, lack of civil wars, lack of state sponsored terror, or food security.
Those things contribute less to the GDP than fridges that break every 4 years.
Anyway, yes, there is some serious discussion on whether that process has stopped. This article isn't very good, the source it's extending from isn't trying to compare actual wealth, but still something may have happened recently.
And yes, it's probably the culprit everybody suspects, and economists should be louder in recognizing that some of their schools are in fact fraudulent.
Economists do a lot of soul searching, it seems, but quite enough to quit being economists.
I wonder if anyone has calculated the economic impact of diverting smart, math-capable thinkers from some other useful pursuit into economics. Surely they’d be more productive as accountants, or car mechanics, or as people who throw bricks through windows in the dead of night.
From the outside it looks like the field is an intellectual circular firing squad that produces little of tangible value.
> how it could contribute to destabilizing democracies as the "economic losers" in rich countries started to demand more political power
Far from me to defend globalisation, but what would have been the alternative here? Is the idea that authoritarian governments have less hurdles in a more globalised world?
Of all the comments that are flagged or moderated on here, the fate of this one will be quite telling of the HN community culture. ‘Tech’ brings shame on itself by how it relates to the world and humanity at large
Catch up growth is premised on the assumption that productivity producing innovations diffuse through the world. This assumption is true, of course, but not universally. Many technologies also rely on culture, institutions, human capital.
I assume someone somewhere has a dataset for technology diffusion broken out by country or at least region? Like so[1], but as a table and not limited to just here.
Perhaps that sort of thing could be useful enough to justify the extra bytes?
> [...] three factors [...] Capital accumulation is one.
The obvious omission here is well developed in Imperialism, The Highest Stage of Capitalism: it's hard to accumulate capital when all of the productivity growth from foreign "investment" by the rich world is captured by the "investors".
> Globalization was working; development was succeeding; the gap between rich and poor countries was closing. So there was tremendous reason for optimism about the future.
Even if that had turned out true, so what? The gap between rich and poor countries closing is not the same thing as the gap between the rich and poor closing!
I think that the answer is the death of democracy and the golden age of corruption in poor countries. During the 80-s and early 90-s, the Western world was still trying to defend nascent democracies. It was lampooned by everyone ("Team America: World Police", anyone?) but it _did_ work to some degree.
Around 2000-s the West switched into the "whatever you do, we don't care as long as you stay inside your country" mode. Moreover, the West made it easy to expatriate money. You could earn your fortune in Russia by stealing money from schools via various corrupt schemes, but once you crossed the border of Russia, you instantly became a respected businessman who should be treated with respect.
The last year's Nobel in Economics was awarded to Daron Acemoglu for his work on extractive versus inclusive institutions ("Why Nations Fail"). And the West unwittingly (?) recreated the same conditions that resulted in development gaps during the early colonial era.
And yes, the West is to blame here. Not China. Pretty much nobody in, say, Congo is abusing child labor to get money to emigrate to China. But I bet that quite a few people from Congo now have very nice properties in London.
1. It never really seemed to explain WHY poor countries stopped doing better. It just framed it as "sike, they never were getting better!". But the WHY is still missing.
2. The penultimate paragraph present a thesis that China's commodity boom is the main driver behind the "great convergence". This claim is baseless. Just because the commodity boom in China coincide with the great convergence does make one the "product" (verbatim quote) of the other. In fact these two events are structurally connected and there is no simple one-way causation relationship. Other factors like financial deregularization played a vital role in the great convergence but was completely ignored.
3. Some of the evidences (eg. "Dutch disease") are over-generalizations and ignore the differences between nations.
The good news is PRC, like western capitalist pigs are willing to sell the rope that hangs them. It's never been more affordable and accessible to build up nascent manufacturing. PRC now one stop shop for bootstrapping development from cheap energy to infra to capital goods at involution prices vs PRC developed by paying premium on western capita goods. PRC, also like western capitalist pigs assume their dominance is so entrenched that others are unlikely to catchup, at least not in relevant time frame.
The bad news is unlike western capitalist pigs that drank own koolaid, PRC might be right. Ultimately PRC manufacturing has to also be calibrated to price in bottom 40% of domestic pop whom are relegated to low income, ~2000 USD per year, i.e. they will structurally hold on to low/medium end manufacturing competitiveness even as they move up the value chain. Realistically PRC won't be vacating those low end until 2050s when that cohort starts dying. Or potentially never with automation.
In the meantime, as long as global south slowly trend towards low-middle income, i.e. ~5000 usd customers, that's still growing 3billion+ people into market / S-curve territory for consumer goods from phones to air conditioners to low end nevs. TLDR PRC is giving all the tools for poor countries to catchup, betting they won't. Maybe that's hubris, but there's a reason PRC isn't actually trying to export it's political/development model, because bluntly they don't think others can replicate it, least of all due to PRC agglomeration scale alone. Maybe India.
If I had to guess it’s because GDP growth in industrialized countries are driven by financialization facilitated by cheap power and energy, and the countries that are more financialized don’t exactly want the countries with precious minerals to be industrialized enough to be self sufficient.
That’s why a lot of global south countries with valuable materials (oil, data center building blocks, etc) are often chronically destabilized, but not so much so that it’s impossible to find someone to buy unrefined materials from.
41 comments
[ 3.2 ms ] story [ 53.3 ms ] threadSo we've got 3000 words eulogizing a metric that tells you more about financialization than flourishing. Look at life expectancy, infant mortality, or caloric intake and you'll find a more interesting story -- with some poor countries doing very well, and increasingly so, whereas others are on a fairly grim trajectory.
Healthcare is more properly medical care. There's very little health care or wellness preservation compared to treatment and repair.
I would argue that legal services are more care-like, but there is a fair amount of treatment and repair.
Incorporating sociology, for what it's worth would radically change the picture. Do economists travel? And what is a poor country anyway.. Zimbabwe is put on the same table as south east Asian countries..where do geopolitical aspects get into considerations for countries like Cuba or more recently Venezuela or Iran. Do these things even matter.
No surprise economists have lost legitimity for so many. They don't predict or diagnose the economy of the nations they live in, trying to explain what they call the "global south" as some call it is rather arrogant.
What this research may have got right is to nuance what their predecessor had claimed. But that wasn't too hard.
My tip for economists: go live in rural areas in each country you claim to diagnose. Speak to the locals, grand ma can tell you what it cost to get clean water just a few decades ago vs now. Maybe you will start to understand what poverty even means.
You could be forgiven for believing that if we didn’t have literal real-world experiments in the 20th century where countries went from dirt poor to rich without doing any of the shit you think makes countries rich.
What’s most offensive about your virtue signaling is that it helps keep people poor. If we had kids in college studying how Lee Kuan Yew systematically made his country rich, instead of studying fucking socialism, you’d save literally millions of lives.
Free markets!
Or is it the wealthy exploiting the poor through low wages?
Outsourcing worked while we didnt have AI to the level we needed
It was always gonna be a temporary stopgap. Sorry, the global community doesnt have enough empathy for humans THAT far away to actually share wealth w them. At least we graduated to having social safety nets within nations.
It’s a graph of regional GDP per capita as a percentage of the U.S. Latin America was around 40% around 1950, but has declined to around 25% by 2018. Sub-saharan africa has slowly lost ground since 1950. Southeast asia has gone from almost as poor as Africa in 1950 to almost as rich as southern europe (50% of US GDP per capita).
What makes some countries rich and some countries poor? In the modern era, I think political dysfunction explains a lot. Developing countries with neoliberal governments that started out authoritarian (Singapore, Korea, Taiwan) have done well. Countries that can’t maintain a stable government have suffered.
In my home country, they were experiencing 5-6% per capita GDP growth for about 15 years. But then a motley coalition of idealistic students and Islamists overthrew the government. I suspect that will lead to a lengthy period of slow growth, because who wants to invest in a country where people regularly overthrow the government?
Since the 50's, Europe and select Asian countries received large investments from the US; Latin America received coups supported by CIA and governments that sold out to foreign interests.
I learned this some years ago. I'd heard the same thing as everyone else, about how Africa was booming and would surely approach developed-world standards Real Soon Now. Nope! <https://np.reddit.com/r/dataisbeautiful/comments/9valp9/gdp_...>
There was no revolution for independence which kept the same families of land owners in the elites through it, after there was no revolution to phase out the monarchy in favour of the Republic, and the same entrenched elites managed to keep going since their local power was already settled. All of this is late 19th century.
Push this through the 20th century, and the same elites wanted to keep their power which was mostly based on agriculture production or mining: coffee, sugar cane, cattle, gold, iron ore, manganese. Any divergence of public policy investment away from these was met with hard pushback.
Industrialisation really only started in Brazil in the 1940s, it was rapid and captured by the same groups, just barely 20 odd years into the process the military dictatorship took over power and maintained the process of corporatism into the same elites (since most of those were supportive of the junta). Another 20 years of dictatorship left a corrupt political body, with the amnesty for the junta many members of the dictatorship party went back into normal political life under democratic rule with predictable outcomes to whom they would favour.
There never was a revolution such as land reform to distribute power in rural areas to more people, no industrial revolution to tear down agriculture/extractivism-based elites grip on power, and with corruption there's always the tilting of the scales towards the old elites with deep connections throughout all the layers of the State in new ventures.
Many issues with Brazil's high corruption stem from these roots, "coronelismo" [0] is still present even in large state capital cities.
[0] https://en.wikipedia.org/wiki/Coronelism
https://whyevolutionistrue.com/2019/01/31/is-the-world-reall...
It's made even worse by the great bias towards "everything about globalism and capitalism is obviously fantastic for the world!".
This case is such a prime example of both of the above. Firstly, the one-off China event having such a big impact on its own that general theories are entirely irrelevant. Second, of course
> "Now that those were swept away—they were, he said, merely a “temporary phenomenon”—the catch-up growth that economic theory predicted had finally arrived. Globalization was working; development was succeeding; the gap between rich and poor countries was closing.
Consider this: if you take 'countries' as given (questionable), and some become rich whereas others remain or become poor, by induction you'd expect those trends to continue. A country that has remained poor for decades is likely to remain poor for decades, etc. "Bad governments" and other conditions that create poverty are not some kind of mean-reverting aberration.
The economists will carry on though, and thanks to their connections with finance and government, their prestige will never truly wink out.
The fundamental thrust of the article is that poor countries only "converged" for a short while due to the Chinese-driven commodity boom, and I think this argument is very compelling. Worse, as history has shown tons of times, commodity booms often end up being bad for a country in the long term because they don't lead to meaningful investments in other productivity-improving endeavors (e.g. Dutch disease that the article mentions).
And I think a subtext of this article is that the economic profession in general has a ton of soul searching to do. Too often economics has depicted rosy outcomes for a host of activities where it has just been flat out wrong. This article goes into detail about how "convergence" almost never happened except for a short "sugar high" driven my Chinese commodity demand. Similarly, I've seen a few mea culpas over the years arguing that the once orthodox view that globalization would be great for everyone failed to take into account how it could contribute to destabilizing democracies as the "economic losers" in rich countries started to demand more political power, one aspect in the rise of populism and some of its dangerous effects.
What kinds of measurements are you referring to? Because poor countries are absurdly clearly converging since the end of WWII, but only if you don't ignore things like political independence, lack of civil wars, lack of state sponsored terror, or food security.
Those things contribute less to the GDP than fridges that break every 4 years.
Anyway, yes, there is some serious discussion on whether that process has stopped. This article isn't very good, the source it's extending from isn't trying to compare actual wealth, but still something may have happened recently.
And yes, it's probably the culprit everybody suspects, and economists should be louder in recognizing that some of their schools are in fact fraudulent.
I wonder if anyone has calculated the economic impact of diverting smart, math-capable thinkers from some other useful pursuit into economics. Surely they’d be more productive as accountants, or car mechanics, or as people who throw bricks through windows in the dead of night.
From the outside it looks like the field is an intellectual circular firing squad that produces little of tangible value.
Far from me to defend globalisation, but what would have been the alternative here? Is the idea that authoritarian governments have less hurdles in a more globalised world?
Prosperity and growth come from free markets. The correlation is very strong. Poor countries are poor because they eschew free markets.
Perhaps that sort of thing could be useful enough to justify the extra bytes?
[1] https://techliberation.com/2009/05/28/on-measuring-technolog...
The obvious omission here is well developed in Imperialism, The Highest Stage of Capitalism: it's hard to accumulate capital when all of the productivity growth from foreign "investment" by the rich world is captured by the "investors".
Even if that had turned out true, so what? The gap between rich and poor countries closing is not the same thing as the gap between the rich and poor closing!
Around 2000-s the West switched into the "whatever you do, we don't care as long as you stay inside your country" mode. Moreover, the West made it easy to expatriate money. You could earn your fortune in Russia by stealing money from schools via various corrupt schemes, but once you crossed the border of Russia, you instantly became a respected businessman who should be treated with respect.
The last year's Nobel in Economics was awarded to Daron Acemoglu for his work on extractive versus inclusive institutions ("Why Nations Fail"). And the West unwittingly (?) recreated the same conditions that resulted in development gaps during the early colonial era.
And yes, the West is to blame here. Not China. Pretty much nobody in, say, Congo is abusing child labor to get money to emigrate to China. But I bet that quite a few people from Congo now have very nice properties in London.
1. It never really seemed to explain WHY poor countries stopped doing better. It just framed it as "sike, they never were getting better!". But the WHY is still missing.
2. The penultimate paragraph present a thesis that China's commodity boom is the main driver behind the "great convergence". This claim is baseless. Just because the commodity boom in China coincide with the great convergence does make one the "product" (verbatim quote) of the other. In fact these two events are structurally connected and there is no simple one-way causation relationship. Other factors like financial deregularization played a vital role in the great convergence but was completely ignored.
3. Some of the evidences (eg. "Dutch disease") are over-generalizations and ignore the differences between nations.
The bad news is unlike western capitalist pigs that drank own koolaid, PRC might be right. Ultimately PRC manufacturing has to also be calibrated to price in bottom 40% of domestic pop whom are relegated to low income, ~2000 USD per year, i.e. they will structurally hold on to low/medium end manufacturing competitiveness even as they move up the value chain. Realistically PRC won't be vacating those low end until 2050s when that cohort starts dying. Or potentially never with automation.
In the meantime, as long as global south slowly trend towards low-middle income, i.e. ~5000 usd customers, that's still growing 3billion+ people into market / S-curve territory for consumer goods from phones to air conditioners to low end nevs. TLDR PRC is giving all the tools for poor countries to catchup, betting they won't. Maybe that's hubris, but there's a reason PRC isn't actually trying to export it's political/development model, because bluntly they don't think others can replicate it, least of all due to PRC agglomeration scale alone. Maybe India.
That’s why a lot of global south countries with valuable materials (oil, data center building blocks, etc) are often chronically destabilized, but not so much so that it’s impossible to find someone to buy unrefined materials from.