The long, slow death of global development

https://americanaffairsjournal.org/2022/11/the-long-slow-death-of-global-development/

by telotortium • 3 years ago

74 77 3 years ago

americanaffairsjournal.org

eru8• 3 years ago

Compare https://noahpinion.substack.com/p/the-polandmalaysia-model

rramadass4• 3 years ago

Great Link!

See also all the other articles on various countries named The Developing Country Industrialization series by the same author here: https://noahpinion.substack.com/p/the-developing-country-ind...

sien2• 3 years ago

India has increased in GDP per capita from $3629 in 2006 to $6800 in 2018. That's a massive increase in GDP per capita for ~1.5Bn people.

https://ourworldindata.org/grapher/gdp-per-capita-maddison-2...

(edit) This is at Purchasing Power Parity, thanks to unmonk for pointing this out.

ummonk6• 3 years ago

As the article points out, PPP adjustment is misleading. Since GDP is disproportionately contributed to by higher income / higher COL urban areas, but PPP adjustment is made based on the average COL (thus mostly weighted based on rural areas), such PPP based calculations are grossly misleading.

India certainly has had a substantial rise in GDP per capita, but the absolute prosperity is nowhere near $6800 GDP per capita.

sien2• 3 years ago

The rise in Indian nominal GDP per capita is even higher than that at PPP.

https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location...

In the year 2000 it was $US 442. It is now $2256 . A five fold increase.

Robotbeat3• 3 years ago

Wait a minute, average cost of living would be averaged the same way that GDP is averaged. So this is just cope for the fact that reality doesn’t fit with the piece’s argument.

djha-skin• 3 years ago

That's an increase of about 5% per year over 12 years. Average inflation is typically 3%. So on average adjusting for inflation, India grew by 2% per year. This small number does not seem like something worthy of a headline.

hotpotamus• 3 years ago

GDP numbers are always supposed to be reported in inflation adjusted terms.

esafak• 3 years ago

And extreme poverty has plummeted from 40% in 2004 to 10% in 2019.

https://ourworldindata.org/grapher/share-of-population-in-ex...

qikInNdOutReply• 3 years ago

Earth overshoot day is at july now. https://www.overshootday.org/

So we got another 40 years, till it reaches zero.

misssocrates• 3 years ago

There's an argument that the world of atoms stalled decades ago and most growth since then has been in the world of bytes.

If that's true, why? What happened in the world of atoms?

dividefuel• 3 years ago

My naive theory is that we're well into the diminishing return stages of the S-curves of many of our technologies. We need major breakthroughs that can start new S-curves.

ch4s3• 3 years ago

This feels intuitively correct to me, but I’d have trouble clearly explaining why. I’m interested to see where bio-tech goes in the next ten years though.

mcstafford• 3 years ago

I'm a little curious, but haven't heard a word of what you're referring to. A quick search for 'atoms stalled' didn't result in anything that felt helpful.

Do you have a link that would clarify?

dontwearitout• 3 years ago

I assume they mean "atoms" as in physical material. I think they're saying physical sciences are stalling out and computer science is responsible for most growth now. I'm not familiar with this term though, and disagree with the sentiment.

marcosdumay• 3 years ago

Market consolidation happened.

Our technology started favoring really large companies again, ending the era of innovation that was the late 19th and most of the 20th centuries. People just can't start from nothing and create something on the real world.

lr4444lr2• 3 years ago

This is Peter Thiel's thesis, and his answer is basically overregulation born of a cultural fear and pessimism of science bringing doom rather than progress that crept in slowly after WW2.

runlaszlorun2• 3 years ago

Not to be semantic, but you meant that this is his answer as to what the cause is? Or that’s his recommendation? I don’t really follow his stuff much but I’m guessing the first.

Btw, I have to be skeptical of the thesis here. Certainly the tech world is not full of “overregulation”. And I think it’s quite a stretch to say “cultural fear and pessimism of science bringing doom” given the broad glowing admiration of whatever the industry hype flavor of the month is. Not to mention the cult-like levels of belief and worship among the singularity peeps et al. While back down here on earth, many of us are scratching our heads about what we can possibly do in the face of climate change, a polarizing and surveillance enabled internet, millions of lines of technical debt that have little chance of keeping a persistent cyber threat at bay, and various other second order networks effects that we never seem to foresee in our first order money opportunities. Heck, I’ll throw in one more that certainly has been a cultural trope for a while but prob isn’t given enough airtime these days. If you take the recent advancements in drones (swarms especially), autonomous vehicles, near realtime satellite imagery and internet communications… and link that up with a current global geopolitical trendline that’s clearly not looking overly rosy… you’re racing directly at the Skynet-ish scenario cliche of autonomous machines that kill. I don’t think that swarms of cheap drones will allow us to keep the man-in-the-loop control given a global race to the bottom. And I say these things as an MBA and former army officer who would prob have laughed at these claims even 10 years ago.

Heck, I’ll go ad hominem here. Given that I have libertarian leanings myself, Thiel does seem to come across as someone who has made his money in an industry gone south, but now simply doesn’t want to pay his taxes.

Apologies… that escalated kinda quickly. I actually started this diatribe intending to ask for clarification. And perhaps you were merely stating Thiel’s thesis and my ire is completely unjustified.

But apparently these days I have little patience for the weak sauce party lines that have been parroted for decades.

~ edited for an egregious typo

Michelangelo113• 3 years ago

Bytes are just much more tractable, that's the root of the opportunity/problem.

And nothing happened in the world of atoms, it's just that the first somewhat useful things spawned by the world of bytes appeared in the mid-70s or so and, bytes being so much more tractable, capital and intellectual energy started flowing to that world in massive amounts.

neovialogistics• 3 years ago

Growth as some kind of synonym for quantified (how?) technological progress: I'm unqualified to answer but I suspect it has something to do with reconciling macroeconomics and the ecological concept of net primary production.

Growth in terms of $ equivalent, adjusted for inflation: even for the mere world of atoms, this is untrue. Global GDP roughly dectupled from 1950 to 2008 and there's no way that's solely attributable to digital services.

eru8• 3 years ago

What does that even mean? And what statistics or other evidence do you have for that view?

To take one perhaps naive interpretation:

For example, encyclopedias used to be sold as a collection of dozens of heavy volumes. Producing them was a lively business.

Nowadays, everyone gets free access to Wikipedia, which has more content than your shelf of Encyclopedia Britannica could ever hold and gets updated all the time.

When you bought Encyclopedia Britannica that showed up in gdp statistics. Wikipedia doesn't.

ETH_start2• 3 years ago

>What happened in the world of atoms?

Regulatory regimentation by centralized authorities. Just one of many examples: 5 percent of occupations required a license in 1950. Today, around 30 percent.

In every sector, professional and industry groups have become adept at locking down the market by manufacturing consent for regulatory restrictions. See what the Hotel Lobby did to stem the disruptive potential of Airbnb:

https://www.nytimes.com/2017/04/16/technology/inside-the-hot...

In the housing market, the effect of mounting regulatory regimentation resulted in the US having an estimated 36 percent less GDP growth between 1964 and 2009:

https://www.aeaweb.org/articles?id=10.1257/mac.20170388

andromeduck• 3 years ago

Energy production/consumption started plateauing because people were afraid of nuclear.

IceHegel2• 3 years ago

From the perspective of poverty statistics, Africa will assume particular importance: by far the continent with the worst economic performance over the last several decades, it is there that the most significant population growth will occur over the next century. The result, pending dramatic change, is a world in which the progress made against poverty over the last forty years will slow, stagnate, or even reverse.

It has always struck me as strange that Africa as a continent would grow its population so much without corresponding development.

hn_throwaway_99• 3 years ago

Would have to search for it but read an article recently that, even in Africa, population growth is slowing faster than expected. It was basically saying that peak global human population would peak earlier than recently thought.

dahfizz• 3 years ago

This is a well documented phenomenon. Poor people have more kids than rich people.

pphysch2• 3 years ago

Africans tried many times over the past centuries to establish stable sovereign states (a prerequisite to large-scale development), and each time they got brutally crushed by foreign powers. It's not for lack of trying.

Robotbeat3• 3 years ago

This argument, though, is pulled out of thin air. Population growth in Africa is slowing dramatically as it’s urbanizing, and it’s also dramatically developing. Even some of its poorest areas (with fundamental geographic challenges, like being landlocked, on top of a plateau without navigable rivers to the sea and without hood road or rail networks in neighboring countries) are doing pretty well. Rwanda, for instance, has grown a factor of 4 in real per capita gdp (PPP) from 2000 ($616/capita) to 2021 ($2460/capita). https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locat...

Literally 4 times the wealth per person! And the effects are not just due to a small number of people or raw money alone. The infant mortality rate has dropped from 110 per 1000 live births in 2000 to just 30 in 2021 and still falling. https://data.worldbank.org/indicator/SP.DYN.IMRT.IN?location...

…as its birthrate has dropped from 5.9 per woman in 2000 to 3.9 in 2020 (and still falling fairly quickly). https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locat...

There’s no reason to suspect this trend won’t continue as infrastructure is built up and these places further urbanize. In fact, some of the wealth effects are almost mechanical as fertility rates stabilize, because of the improvement in the dependency ratio.

Fertility rate is going to fall in Africa and I’ve seen no good argument for why it wouldn’t. Every trend is in that direction and every obvious force as well.

twelve40• 3 years ago

but it is not pulled out of thin air, they list a bunch of case studies in TFA. If you don't like their numbers/stories, here is a recent quote from the World Bank on Nigeria:

This, it said, translates into growth per capita of 0.2 per cent in 2023 and 0.4 per cent in 2024–25, which is insufficient to reduce extreme poverty in the country.

https://www.premiumtimesng.com/business/business-news/592952...

that country grows by a Rwanda every couple of years. Sure it will probably slow down the population growth by mid- or end of this century. But the economy is not keeping up for them to get out of poverty.

pphysch2• 3 years ago

Interesting that a journal called "American Affairs" is essentially rejecting the Washington consensus/neoliberalism and strongly imply that the neo-Westphalian/Chinese model is the future. We are truly entering a new era.

Michelangelo113• 3 years ago

American Affairs is a very anti-globalist journal, kinda broadly aligned with Trump's foreign policy (but they abhor Trump's crassness, populism, etc.).

IceHegel2• 3 years ago

There are good people on both sides.

jonstewart• 3 years ago

https://en.wikipedia.org/wiki/American_Affairs

https://en.wikipedia.org/wiki/Julius_Krein

andrewmutz• 3 years ago

Anyone can name their publication anything. This article was written by David Oks, who is the furthest thing from the Washington consensus. He was one of the high school kids who promoted Mike Gravel for president on Twitter in 2020:

https://en.m.wikipedia.org/wiki/David_Oks

eru8• 3 years ago

American political discourse has been against the Washington consensus and neoliberalism for quite a while now.

Come to think of it, neoliberalism has been unpopular for quite a while now. It's a miracle the world is broadly still as neoliberal as it is. I guess politicians fear the economic fallout from giving in to populism more than they want the short term vote gains?

jackcosgrove2• 3 years ago

the tradability of manufactured goods means that there are no such automatic limits to manufacturing growth

This statement seems at odds with the rest of the piece.

The problem with manufacturing as a development strategy (and I agree with the opening - it's the only proven development strategy) is that not everyone can manufacture. You'd have too many goods!

I've always disagreed with the economic belief that demand is infinite and only constrained by supply. As others in this thread have alluded to, our material progress (as opposed to digital progress) began to slow down in the 1970s. I think part of this is that to a large extent people's material needs in developed countries were met by things like plumbing and electrification. I use developed countries here both as an example of economic trends at the frontier, and as the most likely consumers of industrial goods given their wealth.

Of course that leaves the needs of 90% of people in developing countries unmet, but as the article explains China supplied those needs after 1979. Manufacturing is efficient and one factory worker can meet the material needs of 1+N consumers.

The whole world can't work in factories because there isn't enough demand for all those manufactured goods. Just look at the global steel industry.

A lot of people are too poor to engage in global trade, and manufacturers of any extraction will not give away their wares.

Development, unlike the global phenomenon observed from 1945-1975, seems more like taking turns being the workshop of the world. 1980-2020 was China's turn.

bruce3434342• 3 years ago

one factory worker can meet the material needs of 1+N consumers.

Non native speaker here from the Netherlands. What meaning is implied in your usage of 1+N?

jackcosgrove2• 3 years ago

N being a positive number, maybe fractional. So one factory worker assembling sinks can supply sinks for five households. Of course there's a team of workers assembling the sinks, but you get the idea. In this example N=4.

rcme• 3 years ago

I think there is massive demand for goods (maybe not infinite), but demand is largely constrained by supply. I could think of hundreds of things I would love to own, but can't, due to the expense. If there was more supply, the prices would be lower, and I could consume more.

ummonk6• 3 years ago

You're assuming that manufacturing growth has to be primarily export-led, as China's was. But that wasn't how many of the other industrialization success stories kicked off their manufacturing industry - they did so by starting out primarily producing for domestic markets. There, there is high latent demand that can be bootstrapped via industrialization.

dirtyid2• 3 years ago

that wasn't how many of the other industrialization success stories

Within context of modern developement, i.e. post ww2, where development is rapid industrialization in a few generations, success stories are essentially the Asian Tigers who hammered export led growth to accumulate foreign reserve (usd) then spend to accumulate increasingly expensive capital to make modern goods, throw in some industrial policy to protect native industries without pissing off trade partners (almost benefactors) who can turn off the FX / even tech transfer tap. Very few developing countries have the resources to bootstrap without bringing in foreign cash to buy foreign capital to bootstrap industrialization. Otherwise they start at essentially square one, for which the products are uncompetitive enough relative to imports from sufficiently industrialized economies that there is little latent demand, unless you go NK autarky route. It's the difference between saving up for decades vs taking out a loan and starting right away.

rramadass4• 3 years ago

+1.

Also every developing country needs its own base manufacturing industry in somethings to give it some degree of autonomy in deciding its own future.

zozbot234• 3 years ago

not everyone can manufacture. You'd have too many goods!

This is not a factor; even when there isn't any demand for more manufactured goods in an absolute sense, there's plenty of demand for increased product variety and differentiation, which requires extra labor and capital to supply.

dirtyid2• 3 years ago

Also consider PRC manufacturing + secondary industry sectors roughly peaking at ~300M for both domestic and global demand. Past decades of global demand wasn't enough to lift 1.4B PRC into higher income like other Asian Tigers, and PRC industrial policy + automation means they intend to hold on to as much industries as possible. Going forward, there's going to be less manufacturing jobs to spread around. Some small/medium size countries can grab their workshop turn, but I think with return of big bloc industrial policy, especially for strategic sectors, very few will get chance to build up to high end manufacturing / high income.

rramadass4• 3 years ago

Building a Manufacturing Industrial Base in at least some Goods is mandatory for every Developing country. The Services Industry will always be disrupted by emerging technologies and hence is not reliable to base an Economy on. It is also the case that only Manufacturing can absorb Unskilled Labour which is the main problem in developing countries.

The Covid pandemic and Ukraine-Russia war has exposed the weaknesses inherent in the "Global Economy" where a single problem affects the entire World due to everything being interlinked together. This is further intensified by the self-interest/selfishness/hypocrisy of the developed Western countries since they have managed to engineer the system to their benefit while short shrifting the developing countries.

ETH_start2• 3 years ago

>Other problems are more subjective; many have criticized the $2.15-a-day threshold (at 2017 purchasing-power-adjusted prices)—designed to reflect who would be poorest in the most impoverished countries, like Mali or Afghanistan, and not in even slightly richer countries like Angola or Pakistan—for being far too low to provide for sustenance or normal human health outcomes, and thus to measure anything meaningful about real graduation from poverty.

This is mental gymnastics done to dispel evidence that goes against the cynical anti-capitalist ideology that is so in-vogue.

The poverty line in question does, contrary to this claim, "measure [some]thing meaningful about real graduation from poverty".

If the author contends that living at the $2.15-a-day threshold is an abysmal quality of life, then what does he imagine living at below that threshold to be like?

Does he imagine that it's all indistinguishable anguish at those levels, and therefore that living on $2.50 a day is no improvement over living on $1.25 a day? Nothing could be further from the truth. At extreme levels of poverty, a 50% or 100% increase daily purchasing power is often the difference between life and death.

jschveibinz• 3 years ago

From the point of view of Koch, Halliburton and Bechtel, for example, I suppose this is probably true.

ummonk6• 3 years ago

Should be noted that the previous governor of the Reserve Bank of India who was before that Chief Economist at the IMF is now going around criticizing the Indian government's nascent attempts to kickstart manufacturing instead of following the services-led growth model that he advocates.

We went through two decades where many in the global intellectual class actively campaigned against industrialization, and with degrowth strategies for managing CO2 emissions being in vogue now, there is a risk that such counterproductive advocacy will continue, just as industrialization becomes increasingly harder for the reasons mentioned in the article.

mdani• 3 years ago

The previous RBI governor is entering politics and joining the opposition, so his current opinions should be taken as political rather than purely academic.

kelipso• 3 years ago

I don't follow what he says but I very much doubt his current opinions are any different from before. I've been reading about India + service economy + how great service economies are + how India can skip the manufacturing phase of a developing economy and jump straight into service economy in mainstream media articles in both US and India since at least early 2000s.

pkd3• 3 years ago

To provide more context on this, Raghuram Rajan participated in a march across India led by the then leader of opposition. He has not in any official capacity joined the opposition.

noduerme• 3 years ago

I'm a layperson in these topics, but I've begun to suspect that degrowth is the new expression for what used to be called the "white man's burden", with global warming replacing classical Malthusian overpopulation fears. Particularly as it's applied by first world economies toward developing ones.

I have no problem as a libertarian locking in first mover advantage, but doing it by accusing others of what you yourself are guilty of is disgustingly hypocritical. I've even come to miss the kind of hypocrisy that knows what it's saying and doing, as opposed to the kind that simply takes the status quo for granted as if it had existed forever.

carlmr2• 3 years ago

locking in first mover advantage, but doing it by accusing others of what you yourself are guilty of is disgustingly hypocritical

If we don't get degrowth going now it's going to be too late for the world.

It's hypocritical, but also if the world is industrialized completely it won't be livable anymore.

In either case, it's the tragedy of the commons and we're all f-ed.

pkd3• 3 years ago

Eh, this is a bit misleading without context. The person in question is Raghuram Rajan. He is not criticising manufacturing led growth, but the idea that India can blindly follow the path that China took, simply because the world is very different now than 30 years ago when it comes to globalisation.

He thus thinks it is more appropriate to "make for India" than "make in India", the latter being the name of the initiative the current government started back in 2014 - when he was the governor of RBI. Also he has been saying it since 2014 at least, not "now" as the parent implies.

https://www.livemint.com/Politics/nEPZGnUMtLN3o86upKbPsI/Rag...

ummonk6• 3 years ago

https://www.youtube.com/watch?v=kfAEgdri6C4

https://economictimes.indiatimes.com/news/economy/policy/the...

He's been pretty explicitly against manufacturing-led growth and in favor of services-led growth. And indeed "make for India" strategy would mean India remains a net manufacturing importer as it makes some goods for itself and imports others, without any exports to balance out the goods it cannot produce.

sumanthvepa• 3 years ago

This characterization of Raghuram Rajan is seriously misleading. He has never advocated against manufacturing. He's cautioning that we(I'm Indian) won't be able to replicate China's rate of progress as the conditions in the world are different now.

Jeff_Brown• 3 years ago

It's hard to know how real stagnation is. Certainly since 1961 growth has been on a tear, rising more than 7 fold in low income countries[1], and 26 times for the world as a whole[2].

If you restrict attention to the window from 2014 to 2021, then growth in low income countries has been nil -- but the same is true from 1976 to 2001[1].

Rises in gdp per person are almost by definition technological, and the improvements in and the diffusion of tech are both hard to predict.

It's clear, though, that growth in lower income countries has been slower.

[1] https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location... [2] https://data.worldbank.org/indicator/NY.GDP.PCAP.CD

havblue• 3 years ago

So if the macroeconomic trends look bleak for the world, what's the microeconomic approach? Attempt to move to a location where there will be more economic growth? Have more kids? Buy gold?

The long, slow death of global development

Related Stories