“An important strand of Western political thought has been concerned with the distinction between two types of freedom. It distinguishes between ‘negative’ freedom, or freedom from constraints imposed by others upon the individual, from ‘positive’ freedom, or freedom to achieve self-fulfilment and realize one’s human potential. In order to fulfil one’s human potential it is necessary to have access to the physical and cultural pre-requisites for the realization of one’s capabilities. Access to education is the most important of all the pre-requisites for self-fulfilment and access to healthcare follows closely behind in terms of importance for human self-fulfilment. Access to food, shelter, personal security, clothing, heating, lighting, safe water, sewage services, means of inter-personal communication and transport are all necessary for self-fulfilment. A just society is one that ensures through one means or another that all citizens have equal access to the means for self-fulfilment. The pre-requisites necessary for a fulfilled ‘good life’ are a fundamental human right within any given society. If one considers the whole global society as a single community with a collective interest in the common good of the whole global population, then an equal access to the fundamental pre-requisites for human self-fulfilment is a foundational human right for the whole global community. If the notion of a political society as one that seeks the common good for ‘all under heaven’ is taken seriously, then equal access for all citizens to the means for self-fulfilment is a necessary ethical foundation for that society, whether it is the sub-division of a country, a country or the world considered as a whole.”
Peter Nolan (2019), China and the West, Routledge, p.180
How does economic development happen? After World War II, many development economists rose to prominence, such as Paul Rosenstein-Rodan (the big push), Arthur Lewis (the dual-sector model), Walter Rostow (the linear stages of growth) and Albert Hirschman (unbalanced growth and linkages). Given the continued importance of industrial policy, it is particularly worthwhile to revisit the […]
Last weekend’s G20 summit in Osaka resolved nothing substantial in the ongoing trade and technology war that the US is now waging with China. At best, a truce was agreed on any further escalation in tariffs and other measures against Chinese tech companies. But there was no long-lasting agreement reached. And that’s because this is […]
Poland’s success in becoming a high-income country with dramatically improved living standards since its transition from communism in 1989 may be one of the lesser-known stories in recent world economic history.
This transition is in stark contrast to Poland’s historical record over several hundred years in which its economic fortunes fluctuated relative to Western Europe, but never got as close in terms of income per head and overall prosperity as it is today.
Marcin Piatkowski has written an interesting book on this subject, Europe’s Growth Champion, which draws on and extends some of the insights of the New Institutional Economics (NIE), particularly the work of Daron Acemoglu, Simon Johnson and James Robinson (AJR). Continue reading
The IMF recently published a refreshing paper on the principles of industrial policy. The paper is quite lengthy, so I will summarise and discuss some of the main points here. The authors do not speak for the IMF of course, and it merely reflects their current research, but it remains important.
The paper is important because it unambiguously makes the case for an active industrial policy in developing countries to enable them to catch up with the richest countries.
They argue that successful examples of such a development strategy have been extremely rare in recent decades, but that it is vital to learn from them. They use the case studies of the ‘Asian miracle’ economies of South Korea, Taiwan, Singapore and Hong Kong, which were relatively poor some decades ago, but managed to industrialise and grow rapidly, enabling them to catch up and graduate into the club of advanced economies.
They also note that most if not all of today’s rich countries, including the US, Japan and Germany, followed such a strategy during their catch-up phases of growth, and continue to employ industrial and technology policies, albeit in different forms.
The paper is also refreshing because the IMF, and the World Bank, are not known for supporting the principles of industrial policy as a viable development strategy. In their dealings with financial crises and developing countries in recent decades, they have tended to promote and enforce an anti-developmental state neoliberal policy agenda, known as the Washington Consensus, with often dire results for levels of poverty and inequality and the ability of governments to encourage successful development. Continue reading
Successful economic development in Palestine will require an adequate theory of development, industrial policy, and institutional reforms.
Recently, the Palestine Economic Policy Research Institute (MAS) published a comprehensive study on Palestinian economic development. In this report, co-authored by my colleagues Heiner Flassbeck, Michael Paetz, and I, we explore possible solutions as to how Palestine could sustainably finance its deficits. Now, after the Israeli elections, Jared Kushner, the US President’s son-in-law and senior advisor, is set to announce the details of the US Peace Plan for the Israeli-Palestinian conflict. Given that the Peace Plan is expected to include a large economic component to solve the conflict, it will be interesting to see to what extent it addresses the fundamental problems we identified in our research.
Our results suggest, succinctly, that under current conditions of excessive imbalances in the external sector (trade and current account), any issuance of debt securities requires fixing these imbalances first, for which, in turn, strategic public intervention is critical. This finding may come as a surprise to most policymakers, as orthodox economic theory suggests that the most efficient ways for countries to develop is through market led (as opposed to state led) policies. Historical evidence demonstrates that none of the advanced countries followed this path in their own development, yet the idea of ‘the market’ as the most efficient development tool is still widespread. Based on this belief, Western institutions wreaked havoc in developing countries during the 1980s and 1990s, and continue to do so (although some institutions, notably the IMF, show significant progress in learning from past experiences).
Jason Hickel is an anthropologist who has written extensively on global poverty and inequality, as well as political economy. Here is a recent post of his, discussing the nature and measurement of, and trends in, global poverty, as a response to a critique by Steven Pinker.
Hickel strongly disputes the idea that falling poverty, where it has occurred, has been due to neoliberal globalisation. Rather, the successful industrialisation and economic development that are necessary for sustained poverty reduction have been achieved with state intervention, industrial policies, and strategic integration with the global economy in countries such as South Korea, Taiwan, Singapore and China.
There is a huge literature on this, but Ha-Joon Chang is perhaps one of the best known academics to have written popular books on how particular forms of state intervention have promoted capitalist development. 23 Things They Don’t Tell You About Capitalism is the easiest read and I have posted a number of excerpts from it over the last few years. Bad Samaritans is also good value. For a more academic discussion see Kicking Away the Ladder.
Thanks to the excellent blog The Case For Concerted Action for posting on this first and drawing my attention to Hickel’s work.