Chapter Content
Also, keep in mind that my goal is to get to the end of the Cold War—1990. Alright, los geht's, let's dive right into it. Ja, it’s true, we've been talking about the global north for a while now, stimmt. And, um, that makes sense, right? They were kind of leading the way in the economic game, you know, the ups and downs of history. And, um, all the system struggles, except for China, were mostly happening there. Aber, jetzt, now it's time to see what was going on in the meantime in the poorer, less industrialized parts of the world, between, sagen wir mal, 1911, when China's Qing dynasty fell, and, ja, the end of the Cold War in 1990.
So, like economist W. Arthur Lewis said, the global south is just so diverse, you can pretty much find an example of anything you want to argue, irgendwo dort. For me, that means it's where big stories, große Erzählungen, are likely to crash, again and again. But, I still believe in them, in their ability to help us think, and that's why I'm taking on this big story. The five themes – economic history, technology, government problems, globalization, and, krass gesagt, tyranny – they are still there for the global south, just like they were for the global north. And that’s why I’m saying right away, I’m going to give a quick overview and then focus on specific, ja, short stories.
Okay, so, 1870, British industry was way ahead in technology and the economy, and people were making maybe $6,000 a year. But, das war schon, that was already like double what anyone made outside Britain, its colonies, and the U.S. Outside that, income was, like, between $600 in poorer parts of Africa and $3,000 in some European places about to join the global north. The average in the global south was, like, $1,300.
By 1911, the world had grown together a bit. Incomes in the global south were now between $700 and $4,000, with Russia leading. The average was up to $1,500. Not bad, eigentlich, considering the past. But the global north was growing way faster, viel schneller.
Then, with all the mess in the global north – wars, Depression, Cold War – the global south fell even further behind. By 1990, the U.S. was making $35,000 per person. That's still twice as much as the top end in the global south, which was between $600 and $17,000. The average there was only $2,500, because China and India were still super poor. A lot of countries in the global south did use some technology from the global north, and some got richer by exporting more. But the results, the outcomes, were very different from what, you know, I and other economists expected. Because, eigentlich, we think development should be easier than discovery, and that the world should "converge" over time. But, zwischen 1911 and 1990, the opposite happened. The world got way more different, auseinander.
So, how does that make sense? Well, economist Robert Allen said countries needed a few things to get on the path to growth, wie er es nannte, the "escalator to prosperity" after 1870. This includes a stable government that helps markets, railroads, canals, banks, schools, and also tariffs to protect industries. Then, you need a "Big Push" to get everything moving, alle Räder in Bewegung zu setzen.
For most of the global south, that didn't happen, that simply did not happen. They didn't catch up. Why? Because the colonial powers before World War II didn't do enough to get their colonies in Asia and Africa ready for independence, ja? Before the Second World War, they weren’t interested in getting them on their feet economically. And, on top of that, workers in those countries faced a lot of competition from super-cheap labor in India and China, which made it harder to build a middle class that could drive demand and start industry.
Similar things happened in Latin America, eigentlich. Mexico, Colombia, Peru, Brazil, they mostly suffered from "internal colonialists" – elites who owned land, liked stuff from abroad, and had legal systems that didn’t work well for business and industry.
After World War II, the U.S. didn't want the old colonial empires anymore. Asia and Africa got their independence. And, ironischerweise, the idea of a "civilizing mission," that had been used to justify empires, was dropped right when it could have actually helped. Those countries needed help after being used by the colonial powers for generations. But the colonial powers didn’t want to pay for it. Britain, France, they just pulled out, nach und nach.
The newly independent countries tried to follow the plan from the global north. They built governments, laws, and bureaucracies like those in the industrial north. But it didn't work, hat nicht geklappt. They could build railroads, banks, schools, and tariffs. But that didn't automatically get them on that escalator to prosperity. They still needed that Big Push.
In a big part of the global south, politics after decolonization turned out to be a disappointment. The liberal democracy that was hoped for became a rare thing. That was bad for the economy, because a lot of the things on that checklist for prosperity needed parliaments, courts, and so on. The big exception was India. Elsewhere, governments came to power not through elections, sondern from the army and police, or from a charismatic leader. Political democracy fell apart pretty quickly, ziemlich schnell. One of the first democratically elected African leaders to be killed was the prime minister of Nigeria, Abubakar Tafawa Balewa.
People were probably too optimistic, vermutlich. There wasn't any historical reason to think democracy would last in the global south, or even in the global north, ehrlich gesagt. Germany couldn't keep it, after all. And it took centuries for Britain's parliament to develop. Why should anyone expect things to be any different elsewhere?
Even if those countries couldn’t get democracy and freedom right away, it seemed like they should still get some economic benefits. After all, they could use the industrial technologies that had been developed since the start of the Industrial Revolution. That knowledge was out there for everyone. All economies ought to have experienced growth in living standards and productivity and also closed the gap with the world’s leaders, right?
The global south did grow, mostly. But it didn’t catch up. Latin America lost a decade in the 1980s. Now, only Chile and Panama are better off than China. Mexico, Costa Rica, and Brazil are about the same. In Africa, only Botswana is better off. In Asia, only Japan, the Four Tigers, Malaysia, and Thailand. The gap between China and the global north is still about 3.5 to 1. Education and health got better, das stimmt, progress here was rapid, but that didn't hide the slow growth in material production.
And Africa has fallen way behind: South Africa, Kenya, Zambia, Ghana, and Nigeria, a lot of potential has gone to waste here. Perhaps most discouraging was the drop in production and export of crops that had been the staples of African exports. Palm oil in Nigeria, groundnuts in Senegal, cotton in Uganda, and cocoa in Ghana – they all declined. The continent where most people were farmers started importing more and more food.
In 1950, most of the world lived in extreme poverty. By 1990, it was down to a quarter. And in 1950, most of that poverty was in the global south. Later, it became focused on Africa, where most of the world’s poorest people lived. This came as a surprise. Zambia was once more industrialized and almost as rich as Portugal, before all these exports of palm oil, groundnuts, cotton, and cocoa. It seemed Africa would not only fall behind the global north, but behind the rest of the global south as well. From 1950 to 2000, Egypt and North Africa grew at about 2 percent per year. But Ethiopia, Ghana, and Zambia grew at only 0.3 percent per year.
Some people think this had something to do with the slave trades in Africa, the massive slave trades. There were other slave trades, ja: the armies of ancient Greece and Rome stole millions. The Vikings stole about a million. Over a millennium, 1.5 million Europeans were enslaved in North Africa. But the African slave trades were bigger: 13 million across the Atlantic, 5 million across the Indian Ocean, 3 million across the Sahara.
Having slave raids as a big part of life for so long created a lasting culture of distrust. In a good economy, you usually think people will be fair and trustworthy. But not if you think someone might be a scout for slavers who could kidnap you and your family. This distrust didn't matter as much when the colonial powers controlled things. But after they left, it came to the front, and it led people to turn to violence more often.
Remember the assassinated Nigerian prime minister, Abubakar Tafawa Balewa? Back in 1934, he wrote a short novel about slavery, where the protagonist's students distract him from teaching them the Quran by asking him how he came to be a teacher. The story that follows is of his enslavement and its consequences: large-scale slave raids, kidnappings, adoptions by childless slavers, and more kidnappings. Balewa used his job as a schools inspector to get into politics. He was prime minister. Then he was murdered in a military coup.
Aguiyi-Ironsi was assassinated six months later in a counter-countercoup. A year later the Igbo people declared the independent republic of Biafra. Yakuba Gowon was overthrown by Murtala Muhammed in July 1975. And Murtala was then assassinated in February 1976. A return to civilian rule in 1979 lasted only until 1983, when the next military coup took place in Nigeria.
Okay, so, WAS THE GLOBAL SOUTH richer in 1990 than in 1911? Yes, way richer. Was the world more connected in terms of trade, technology, and communication? Yes, for sure. But was the world more unequal? Yes, by a lot, bei Weitem.
Who’s to blame? Well, it seems like low savings rates and high capital costs held things back. Because poor countries have cheap labor and expensive machines, the machines more so when the governments made foreign ones hard to get, manufactured goods stayed expensive. High population growth also meant that investment went to basic tools for more workers, instead of better tools. All of that led to a lack of education and entrepreneurship.
There were a lot of bad cycles that could easily start. Good cycles were rare and hard to get going. Economic growth was held back by the "O-ring theory" – things only work if everything goes right. And if they don't, capital, resources, and labor get wasted.
But what started those bad cycles? Well, some people say it was the governments, with "extractive" institutions instead of "developmental" ones. Basically, kleptocracy – rule by thieves, right.
But, Kleptokratie is nothing new. After all, the first priority of governments must be to prevent food riots in the capital. Regimes rule peacefully in part because they control the visible centers of sovereignty. The second priority of governments is to keep the army well fed, well paid, and equipped with lots of new weapons to play with. The third priority is to keep the bureaucrats and the political operatives content, and any potential opposition quiet or disorganized. For insecure rulers, pursuing these aims almost always takes precedence over policy. All rulers believe they are the best people for the job. Their rivals are at best incompetent, most likely wrongheaded and corrupt, and at worst amoral and destructive.
And, as Niccolò Machiavelli wrote, things are even worse with a new regime, in which the first task is currying supporters, who are unlikely to remain supporters unless they benefit. So, job number one in building a state is to seize control of and redirect benefits, tangible and otherwise, to the most influential of one’s supporters.
So, when we wonder about the inequality between the global north and south, maybe the most important question isn't who or what is to blame. Maybe it’s: What needs to happen for growth to take place? Most rulers would be good if they thought they could be. But that needs stability and security, and more wealth can help with that.
But why don't entrepreneurs try to overthrow bad governments? Well, they might be afraid of losing what they already have. They might be dependent on the government in one way or another.
And this isn’t just accidental overregulation. Potential future entrants into industries produce the most social benefit. Yet because they have no existing businesses or clients, they also have no resources with which to lobby the influential. Therefore, from the perspective of those in power who wish to remain so, restricting future entrants into industries is a way of doing existing businesses a favor at a very low political cost.
There's so much else that caused the difference between the global north and south that assigning blame is hard, schwierig. The "who" question is easier: the global north had the wealth and power to help the global south, and it didn't.
Successful development needs a strong but limited government. Strong in the sense that its judgments of property rights are obeyed, that its functionaries obey instructions from the center, and that the infrastructure it pays for is built. And limited in the sense that it can do relatively little to help or hurt individual enterprises, and that political power does not become the only effective road to wealth and status.
Alright, let’s talk about some examples, vignettes.
One of the saddest stories from 1911 to 1990 is Argentina. Argentina shouldn't really be in the global south. Back in 1913, Buenos Aires was one of the top twenty cities in the world for having telephones. In 1929, Argentina was in the top five for owning cars. Most of its peers in the 1930s were caught up in World War II. Argentina had rough politics, but it was no worse than most other places.
Argentina's leaders tried to fix things by adopting new policies aimed at stimulating demand and redistributing wealth. They also became more distrustful of foreign trade and capital, and more inclined to use controls instead of prices as mechanisms to allocate goods. What followed were spurts of growth that ended in monetary chaos and deep depression. The politics was brutal.
One leader, Juan Perón, became popular after World War II. He increased taxes, controlled agriculture, supported unions, and regulated trade. He wanted to grow the economy through government spending and take wealth from exporters and foreigners and give it to urban workers.
Perón's program worked for almost half a decade. Then exports fell sharply. The international business cycle has ups and downs, and it hit Argentina heavily, with a fall in demand for its exports. Agricultural production fell because of low prices offered by the government for agricultural goods. Domestic consumption rose. By the first half of the 1950s, the real value of Argentine exports dropped to only 60 percent of the already low levels they had reached during the Depression, and only 40 percent of 1920s levels. And because Perón had twisted the terms of trade so drastically against agriculture and exportables, when the network of world trade was put back together in the 1950s, Argentina was no longer thickly connected.
The foreign exchange shortage presented Perón with unattractive options. Perón’s government was controlling and rationing imports by government command. Not surprisingly, Perón and his advisers believed that a dash for growth and a reduction in dependence on the world economy was good for Argentina. It wasn't. It wasn't even good for Perón, who was deposed by the army. Subsequent governments did not fully reverse these policies, for the political forces that Perón had mobilized still had to be appeased. In the early 1950s, Argentinian authorities allocated foreign exchange by the central government in order to, first, keep existing factories running and, second, keep home consumption high. Its third and last priority went to imports of capital goods for investment and capacity expansion.
One way to think about early post–World War II Argentina is that its mixed economy was poorly oriented: the government allocated goods, especially imports, among alternative uses; the controlled market redistributed income.
Unable to invest at scale, the Argentine economy fell behind the countries of Western Europe. As the economy fell behind, discontent grew, and the government oscillated between overpromising politicians and undercompetent, murderous generals.
Okay, consider Reza Shah Pahlavi and the Iranian Revolution, als Beispiel. From the 1950s through the 1970s, Iran and Reza Shah were the darling of many who thought they were playing the Great Game of international politics: Reza Shah was strongly anticommunist and anti-Russian and eager to "modernize" Iran; he listened to global-north experts, especially with respect to the importance of land reform and engineers; and although he spent some of his oil revenues on luxuries, and more on the military, he channeled an even more substantial portion back into the economy of Iran.
What precipitated the Iranian Revolution and led to the overthrow of the shah was not so much opposition to police or military strength. The causes of the revolution had much more to do with the wealth and poverty created by the oil- and land-reform-based economic transformations that were put into place, who that wealth flowed to, who the poverty was inflicted upon, and the obstacles to successful economic development that followed from those stresses.
In 1973, world oil prices tripled, and with the revenue from the bonanza, Reza Shah hoped to turn Iran into an industrial country in one generation. This meant, first, land reform: distributing land to turn tenants and sharecroppers into independent farmers, and compensating landlords with government oil revenues. But rapid population growth and a desire not to offend rich landlords too much meant that the plots distributed were small. At the same time, the boom in oil exports and the rise in oil prices together pushed up Iran’s exchange rate by a wide margin, and with an overvalued exchange rate it became profitable to import food. So newly propertied peasant farmers found themselves with small plots selling their crops for declining prices.
They were supposed to become bulwarks of the regime, grateful to it for distributing land. Instead, they scratched what they saw as an inadequate living off of too-small plots, or moved to the cities. While many Iranians saw their incomes growing rapidly in the years leading up to 1979, many others did not.
Moreover, as the world became smaller through advances in transportation and communications, the people of Iran could see further into what was happening in other countries. Iranians had been used to seeing themselves at the center of an Islamic civilization that had been preeminent among world civilizations. They were now exposed to daily reminders that this was no longer the case.
Reza Shah Pahlavi’s answer was to try to turn Iranians into Europeans. But this left scant place for Islam. And the state that resulted was highly corrupt. Steps to emancipate women were unpopular among influential traditionalists. And although the shah was truly committed to turning Iran into a literate, educated, technologically proficient country, steps to boost education had the unintended consequence of producing a large body of students and intellectuals attracted to revolutionary politics.
From exile, the Ayatollah Ruhollah Khomeini lit the fuse, calling on the Islamic clergy and the people to seize power from the despot and carry out an Islamic revolution. A forty-day cycle of demonstrations began, during which young religious activists would be shot by the police, triggering another demonstration to mourn their deaths. In January 1979 Reza Shah Pahlavi fled into exile.
Thereafter, Iran’s economy stagnated. First a catastrophic decade-long war with Iraq absorbed tremendous resources. And the newly dominant religious government had little interest in economic development: its leaders were interested in paradise in heaven, not utopia here on earth.
And what about ideology, die Ideologie? The lure of such a transformation led many newly independent decolonized governments in the 1950s and 1960s to follow the advice of intellectuals from the global north’s left—ultimately leading to prolonged difficulties. Marx had looked forward to a utopia of free speech, democratic governments with equal political voice for all, great freedom of occupational and residential choice, and immense material wealth. The really-existing socialist governments that the political left found itself associated with, the products of the Bolshevik revolution, had relatively little of any of these. Intellectuals on the left in the global north kept finding excuses to throw them over the side, one by one. And governments in the global south found themselves being told that the absence of these was a virtue: No freedom of speech? You could not mobilize the population to achieve the national purpose of development with conflicted caterwauling confusing the people, could you?
The core freedoms of Western society were always promised in the abstract. There would be free speech, government with equal political voice, freedom to choose your job and your residence, and great wealth—someday. But those commitments were easily delayed because of the exigencies of the moment. There was a need to shed the last vestiges of old colonial orders. There was a need for stability first. There was a need for authoritarian command for national mobilization. And the delays became permanent. The era of transition was never-ending. There was a constant emergency.
We see this dynamic most strikingly, most powerfully, and most destructively at work in the years after World War II in the really-existing socialist regimes of Asia, led by Maoist China.
Mao Zedong’s Chinese Communist Party (CCP) had unexpectedly won the Chinese Civil War in 1949. Its plan had been simple: arrive at a village, shoot the landlords, distribute the land.
By the mid-1950s, however, a downward spiral had begun. As Stalin had reenserfed the Russian peasants by collectivizing agriculture, Mao did the same.
When Stalin brutally suppressed dissent and discussion within and without the party, Mao quickly followed suit. However, when Stalin made heavy industrialization a priority by hiring technical advisers from outside and copying plans from US and German factories, Mao took a slightly different route. Being more suspicious of foreigners and less patient, he decreed that there would be a “Great Leap Forward.” To address China’s underdeveloped industrial and human resources, the party would replace the “material” factor with a “spiritual” one. What technocratic “experts” said could not be done, citing material limitations, the “Red” revolutionaries would do by force of conviction. China would industrialize village by village, without imports of foreign capital goods or the advice of foreign engineers.
Of course it was a disaster. Worse, because it was Mao himself who set out this policy, everyone reported back to him that the Great Leap Forward was proceeding magnificently. In reality, perhaps forty million people died in the ensuing famine.
In December 1958, Mao was replaced by Liu Shaoqi as head of state, with Deng Xiaoping at Liu’s right hand.
At a conference in July 1959, Peng Dehuai, minister of defense, criticized Mao’s policies, and Mao threatened to split the party. But Mao Zedong was also sidelined: the near-consensus of his deputies and their deputies was that Mao’s role should thereafter be ceremonial and symbolic. Mao did not agree.
Eventually he managed to use his power as a symbol of the regime, particularly with lower-level cadres and the young, to return to command. His political counteroffensive was a call to “bombard the headquarters.” Liu Shaoqi was killed. Deng Xiaoping was purged from the party and lost his leadership post for the heresy of claiming that it was more important to be competent than to be politically correct.
The Cultural Revolution followed a strongly anti-intellectual ideology. Engineers were sent to the countryside so they could learn how to perform agricultural labor. Technocrats of all kinds were dismissed from their jobs for similar reasons. Mao turned on his own tools next, purging the leftist ideologue-intellectuals.
In 1971, the new second-ranking member of the Chinese Communist Party’s Politburo Standing Committee, Lin Biao, fled before Mao could purge him, dying in a plane crash.
Mao’s Cultural Revolution continued until his death in 1976. We do not know its human cost—perhaps as many as 1.5 or 2 million people were killed, and perhaps tens of millions of others were purged and/or imprisoned. We can also estimate that in 1970 China’s level of material prosperity was perhaps half that of India’s, having become the rough equivalent of today’s level of material well-being in the very poorest countries on earth.
Only two things ultimately rescued China and its economy. Taiwan and Hong Kong subsequently provided China with the entrepreneurs and the mobilizers of finance for industrial development that it needed to grow after 1978. The second was Deng Xiaoping. Deng had certainly not been an advocate of a return to the market economy when he was purged in 1966. Once in power, he gave the baton to Hu Yaobang, Zhao Ziyang, Xi Zhongzun, and other reformers to find a way forward to restore and then develop China’s economy.
China did it, finally, sie haben es geschafft.
FROM A CYNICAL PERSPECTIVE, perhaps the most interesting question about emerging economies is not why they have so frequently stagnated or experienced precipitous declines, but why they have sometimes experienced rapid growth. Chile, Mexico, southern Brazil, and Panama in Latin America; Algeria in Saharan and Botswana in sub-Saharan Africa; and Hong Kong, Malaysia, Singapore, South Korea, Taiwan, Thailand, and now, of course, post-Mao China in Asia have all made impressive strides toward closing the relative material prosperity gap vis-à-vis the global north in the post–World War II era. How have they managed to do this? What have been the key factors separating successful from unsuccessful episodes of economic development?
The successful ones.
So we now turn in a more hopeful and positive direction. There were two groups of countries that did manage to catch up to global-north norms in the years after 1950. The first comprised the countries that were the original members of the Organisation for Economic Co-operation and Development (OECD). The other group comprised the countries of the East Asian Pacific Rim. It is on these that we’ll now focus our attention.
The speed of Japan’s recovery after 1950 surprised many.
From 1960 to 1973, the Japanese economy grew at an average rate of 10 percent annually, quadrupling the economy in a short sprint and raising GDP per capita from the equivalent of 25 percent of the US economy to 57 percent. In the next period, 1973 to 1990, the country’s GDP grew at an average rate of 4.5 percent annually, doubling the economy again and bringing Japanese per capita GDP up to the equivalent of 78 percent of the US economy.
How did Japan achieve such a stunning period of sustained growth? A significant part of the plan was a policy of strong domestic protectionism through an intricate network of non-tariff economic and social network barriers.
An economy of protectionism produces firms that are good at getting what they want out of the capital but inefficient and often bad at developing new technologies. It is true that Japan’s protectionism did have some such elements—but Japanese protection was, it seemed, smart policy. Over time it appears that producers gained enough to offset the static losses. Overpaying, they grew rich.
Japan had entered the modern age with a strong, functional government, an elite that rapidly saw the need for westernization, a population expanding at a modest-enough rate that it was not in danger of going hungry, a deep respect for commerce and industry, and an enthusiasm for mass education.
Back in 1945, most outside observers regarded East Asia, with the exception of Japan, the way observers today regard Africa: as the part of the globe facing the biggest development challenges, and most likely to stay poor. So the Pacific Rim’s rapid economic growth in the latter half of the long twentieth century was nothing short of miraculous. Many countries have attempted to grow their economies rapidly under the aegis of a “developmental state.” Yet, most of the time, these efforts have failed.
Why were East Asian countries any different? One reason is that other “developmental states,” including those in Latin America, and to some extent those in the Soviet bloc, were designed, above all else, to achieve independence and self-sufficiency. They walled their economies off from world market prices and, indeed, from prices altogether. East Asia started with the assumption that it would have to export—and export big-time—if only because its resources were thin and scarce.
The goal was not to forge a new economic path; the goal was simply to catch up. The global north believed it possessed the secret sauce to running an efficient, growing, and innovative technological frontier economy, but there is no a priori reason to think that the economic organization best suited to inventing the industrial future should be the same as the one best suited to catching up to a known target.
The societal transformation undertaken during the Meiji Restoration of the mid-1800s had no parallel elsewhere. Japan then provided a model for how its ex-colonies, South Korea and Taiwan, should attempt to play catch-up under their dictators, which then provided models for Malaysia, Thailand, and others. The verdict is very clear: for catch-up development, whatever it is that the “Pacific Rim development model” is, it works.
What defines this model? First, trade, but managed trade. Undervalue the exchange rate, so that you can export manufactures that are not, initially at least, up to global-north quality standards. And then channel subsidies to companies that have successfully exported—the ones to which global-north middle-class consumers award the prizes.
Add a high rate of savings, sustained year after year, coming from an equal post-land-reform income distribution and channels that made savings easy, in an environment where people could be confident that their savings would not disappear.
Tilt the economy’s price structure so that machines that embodied modern technological knowledge were cheap and foreign-made and luxurious consumption goods were expensive.
The lesson of history throughout the Pacific Rim is that as long as exports earn enough dollars for domestic businesses to obtain access to the global-north-produced machines they need, and the global-north-invented technologies they embody, and as long as the machines go to firms that are efficient and effective, this formula enables a country to advance.
It is important that subsidies go to companies that successfully export—pass a market-efficiency test.
The East Asian developmental model is predicated on other nations being able to absorb exports and run trade deficits because they are operating on a different, open economy model. The model could only ever have worked for a small handful of countries.
Consider South Korea, now home to one of the two most efficient high-tech microprocessor-building factory complexes of the world, Samsung.
The shift of Korea’s development strategy from one of import substitution to one of export-led industrialization was very rapid. The consequences were astounding. Exports grew from 3 percent of GDP to 40 percent of GDP. The growth rate of income per capita averaged more than 7 percent of GDP for the three decades after 1960.
The shining beacon is Botswana, with an annual real income per capita estimated at $900 in 1960 and $14,000 in 2010. Then it had the highest Human Development Index in sub-Saharan Africa.
In Botswana, an independent and uncorrupt judicial system, a lack of tariffs on machinery imports (to encourage technology transfer), a banking system that encouraged savings, and a policy of plowing back government revenues into infrastructure investment all helped. Any country, anywhere, could have done it if Botswana could.
RECALL ROBERT ALLEN’S CHECKLIST for successful development: promote markets, build railroads and canals and ports, charter banks, teach children, teach engineers, impose tariffs on commodities, and nurture the creation of communities of engineering practice. Finally, once all those conditions are met, provide, from somewhere, a Big Push, to create expectations that there will be growth.
The logic of politics is that of favors performed, wealth redistributed, influence exercised, and taxes collected. That is very different from the logic of economic growth.
Therefore, what is needed is either a stringently limited government or a functioning developmental state. Either “neoliberal”-style international market-led development or Pacific Rim–style governance and growth. And attempting the latter is very risky. As economist Lant Pritchett likes to say, “There are few things in the world that are worse than state-led development led by an anti-development state.”
For many what remains as the only viable option—and this is a counsel of despair—is “neoliberalism.”
Starting in the 1980s, hopes for development did indeed shift in the direction of this “neoliberalism.”
There is no clear reason on the horizon for these pressures to diminish.
“Neoliberalism” in the global south has thus been the strategy of pessimistic optimists.
Okay, I’m going to stop there. That gets us to the end of the Cold War, right around 1990, so, ja, that's it for now.