"That insults my intelligence and raises questions about yours."
Nice one.
If the concept of "Luck" scares the hell out of developmental economist, then I reckon the concept of "Intelligence", let alone "Group intelligence" and God forbid "Genetic basis of group intelligence" would scare them all to death.
That a population whose ancestors ran a massive sophisticated civilization (million plus population centers, literate bureaucracies, specialized artisans etc. etc.) should now be able to do so again, is not very surprising. That a population whose ancestors never did any of those things could do so now, let alone at the same scale and efficiency of the previous mentioned groups, really WOULD be surprising.
a lot of Korean and Chinese success is copying and poaching the Japanese engineering talent that made Japan the #2 economy. I don’t think that’s a Western style of development
1. The range of policies that have been pursued more or less successfuly by OECD countries is pretty wide, so going far outside that range is unlikely to be a good idea.
2. AFAICT, countries that avoid military coups and wars, and provide a decent education system, eventually converge to near-OECD levels. Of course, plenty of causality in both directions
How does this sit with the notion that there are strong commonalities in the East Asian model as described by Studwell? To the extent they were taking bets, they were taking bets based on export market successes which would have given policymakers valuable information and helped them avoid squandering resources.
And even if you can't become a big success like the East Asian states, surely it's a big thing to get to Malaysia's or Thailand's level of development, compared to where they were five decades ago. Ok, not exactly third world to first stuff, but real progress in living standards, people being lifted out of absolute poverty. If you don't trust your elites to do the right thing Japan style then this is surely a good consolation prize.
Re. Immigration Luck. Whether a co. can bring in a needed worker has also been turned into a lottery: only one of every three under-the-cap H-1B petitions is nowadays accepted for processing.
Tough to know where to draw the line on any given project, I suppose. Yes, Japan funneled hundreds of millions of dollars into a project that paid off spectacularly, but they also had a very competent government on the basics, and on almost everything else were doing exactly what was prescribed to incrementally improve its economy.
I guess the real lesson is seeing developing countries--and their governments--as corporations. You need the fundamentals in place, or your organization falls apart, but you've also got to differentiate yourself from the competition, and take some risks in order to do so. The basketball metaphor is apt. Most points are basic two pointers, with the occasional free throw to slow things down and line everyone up neatly. Games are won, though, by denying the other team points over time and by upping the number of points you get for each shot (3, instead of 2 or 1). Winners sink threes, but if they don't know how to fire off a quick two when needed, the game's not going to go well either way.
I probably butchered the basketball metaphor, but whatever.
I don't see any mention of Chinese successes. They have built wonderful cities and have spread education throughout their country. I have never been to China, so I know only what I have read and seen on TV. I have no comment on their political structure, which I don't like, but this may be due my lack of knowledge.
Why must everyone be judged by western standards? If we are so great, why are we in the difficult position we are in today?
This was an excellent post and I am looking forward to reading more from this writer.
The case of Japan is most interesting but not really mysterious or inexplicable. It's certainly not a case of luck or some wonderful miracle because its current economy did not spring from nothing. Japan was a major industrial and colonizing power before ww2, and a technological innovator. Japan built and ran the world's first aircraft carrier for example c1920. The mindset, capabilities and historical memory survived the war and served the country exceedingly well, yes as it deeply engaged with western economies until today. The underlying question though, is whether or not Japan's development to an oecd level economy really sprang from its American forced 19th century 'opening' from autarky.
The reason the world bank is conservative when it comes to developing countries (especially Africa) is because these guys take out big loans, fuck up and then blame their failure on the western neo-colonialism. If you don't people to treat you like children you have to stop acting like children.
This is an excellent piece and robust critique of the orthodox World Bank/IMF advice mindset. It also resonates with S. Korea's big bets, leveraging of Chaebol (heterodox), in their rapid growth period. Also with Algeria's big misses in trying to leverage energy.
My objections: why not take an 'optimal portfolio' approach with some high-risk rather than a boom-bust? Some key portfolio principles might include:
1. Safer assets: the physical and digital infrastructure is so light that there are good investments to be made here.
2. Human capital: another safer investment, education and health (a good bit of innovation/efficiency in delivery needed here, but that makes a case for global learning platforms).
3. The high-risk/high return bets alluded to in the article.
Catch-up growth should produce a higher average growth rate anyway (let's say 4%) using a vanilla portfolio. Let's say that selected risky bets help a country beat the benchmark (i.e. 6%+).
Let's remember the flaws in the Japanese investment led approach, as played out since the 90s.
This is just crazy delicious and great reading!
"That insults my intelligence and raises questions about yours."
Nice one.
If the concept of "Luck" scares the hell out of developmental economist, then I reckon the concept of "Intelligence", let alone "Group intelligence" and God forbid "Genetic basis of group intelligence" would scare them all to death.
That a population whose ancestors ran a massive sophisticated civilization (million plus population centers, literate bureaucracies, specialized artisans etc. etc.) should now be able to do so again, is not very surprising. That a population whose ancestors never did any of those things could do so now, let alone at the same scale and efficiency of the previous mentioned groups, really WOULD be surprising.
a lot of Korean and Chinese success is copying and poaching the Japanese engineering talent that made Japan the #2 economy. I don’t think that’s a Western style of development
1. The range of policies that have been pursued more or less successfuly by OECD countries is pretty wide, so going far outside that range is unlikely to be a good idea.
2. AFAICT, countries that avoid military coups and wars, and provide a decent education system, eventually converge to near-OECD levels. Of course, plenty of causality in both directions
How does this sit with the notion that there are strong commonalities in the East Asian model as described by Studwell? To the extent they were taking bets, they were taking bets based on export market successes which would have given policymakers valuable information and helped them avoid squandering resources.
And even if you can't become a big success like the East Asian states, surely it's a big thing to get to Malaysia's or Thailand's level of development, compared to where they were five decades ago. Ok, not exactly third world to first stuff, but real progress in living standards, people being lifted out of absolute poverty. If you don't trust your elites to do the right thing Japan style then this is surely a good consolation prize.
Re. Immigration Luck. Whether a co. can bring in a needed worker has also been turned into a lottery: only one of every three under-the-cap H-1B petitions is nowadays accepted for processing.
Tough to know where to draw the line on any given project, I suppose. Yes, Japan funneled hundreds of millions of dollars into a project that paid off spectacularly, but they also had a very competent government on the basics, and on almost everything else were doing exactly what was prescribed to incrementally improve its economy.
I guess the real lesson is seeing developing countries--and their governments--as corporations. You need the fundamentals in place, or your organization falls apart, but you've also got to differentiate yourself from the competition, and take some risks in order to do so. The basketball metaphor is apt. Most points are basic two pointers, with the occasional free throw to slow things down and line everyone up neatly. Games are won, though, by denying the other team points over time and by upping the number of points you get for each shot (3, instead of 2 or 1). Winners sink threes, but if they don't know how to fire off a quick two when needed, the game's not going to go well either way.
I probably butchered the basketball metaphor, but whatever.
I don't see any mention of Chinese successes. They have built wonderful cities and have spread education throughout their country. I have never been to China, so I know only what I have read and seen on TV. I have no comment on their political structure, which I don't like, but this may be due my lack of knowledge.
Why must everyone be judged by western standards? If we are so great, why are we in the difficult position we are in today?
This was an excellent post and I am looking forward to reading more from this writer.
The case of Japan is most interesting but not really mysterious or inexplicable. It's certainly not a case of luck or some wonderful miracle because its current economy did not spring from nothing. Japan was a major industrial and colonizing power before ww2, and a technological innovator. Japan built and ran the world's first aircraft carrier for example c1920. The mindset, capabilities and historical memory survived the war and served the country exceedingly well, yes as it deeply engaged with western economies until today. The underlying question though, is whether or not Japan's development to an oecd level economy really sprang from its American forced 19th century 'opening' from autarky.
Noah, Thanks for this selection. It is an informative read, and I learned a lot. It’s a good way to start a day.
The reason the world bank is conservative when it comes to developing countries (especially Africa) is because these guys take out big loans, fuck up and then blame their failure on the western neo-colonialism. If you don't people to treat you like children you have to stop acting like children.
this is so good
This is an excellent piece and robust critique of the orthodox World Bank/IMF advice mindset. It also resonates with S. Korea's big bets, leveraging of Chaebol (heterodox), in their rapid growth period. Also with Algeria's big misses in trying to leverage energy.
My objections: why not take an 'optimal portfolio' approach with some high-risk rather than a boom-bust? Some key portfolio principles might include:
1. Safer assets: the physical and digital infrastructure is so light that there are good investments to be made here.
2. Human capital: another safer investment, education and health (a good bit of innovation/efficiency in delivery needed here, but that makes a case for global learning platforms).
3. The high-risk/high return bets alluded to in the article.
Catch-up growth should produce a higher average growth rate anyway (let's say 4%) using a vanilla portfolio. Let's say that selected risky bets help a country beat the benchmark (i.e. 6%+).
Let's remember the flaws in the Japanese investment led approach, as played out since the 90s.
This post is sensational!!! great great great work by Karl. Thank you Noah for bringing him on!
What impact, if any, did Japan's gold reserves had after WWII? I am under the impression they were given back after the war...
Also, and I can't stress enough my excitement, this article bodes well for the incoming travel guide to Japan !
An excellent Sunday morning read.