Brad DeLong's Semi-Daily Journal: A Weblog

I think you could add Singapore to this list...

This logic implies what Africa needed was a significant Communist state to encourage the USto develop all the other countries. Sure that state might have suffered but the rest would have gained (and suppose it was DRC/Zaire then communism even of the North Korean school could well have been better). Interesting, but the history of the Carribean suggest that Cuba did not fulfil this role (although the dynamics are clearly different!)

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Unfortunately, the "financial aid + egalitarian land distribution" explanation fails completely for Hong Kong, as indeed it does for Singapore.

"This logic implies what Africa needed was a significant Communist state to encourage the USto develop all the other countries."

Er ... Africa *had* more than one significant Communist state - Ethiopia, Mozambique and Angola are but three I can name off the top of my head (I exclude Togo on "significance" grounds).

What Africa needed, and what is ignored in the post above, was a greater degree of ethnic homogeneity in the "states" that were left behind by the retreating colonial powers: a pseudo-nation like Nigeria wasn't even governed in a unitary fashion until late in the 1960s, just before a ethnicity-based civil war broke out in the country. All of the countries Brad mentions have the major advantage of being ethnically homogenous, so their elites didn't spend all their time trying to keep the other groups down for fear of being overshadowed.

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When the Kuomintang came they also decapitated the anti-Japanese resistance. That part of the story needs development.

I'm not sure that either Hong Kong or Taiwan is unhealthy. Both are subtropical rather than tropical, IIRC, and not comparable to the Amazon, Indonesia, or Equatorial Africa.

Both Taiwan and Korea were governed by the modernizing Japanese for half a century. While Japan probably treated these countries somewhat as resource colonies, there were big improvements in public administration, record-keeping, infrastructure, education, etc., etc.

The main point about Taiwan and S. Korea being U.S. showcases and military outposts is valid. I also think that both countries were allowed to export to the U.S. while maintaining protectionism on imports. I know that Taiwan in 1983 was highly protectionist and also had major government monopolies (energy, rice, alcohol, tobacco, and much of transport).

Very good, indeed.

We'll never know what Cuba would look like without the embargo. Today's China? Better? Never as good?

But, note that all those Asian countries mentionned here are resource poor. Below a certain level of resource abundance, purely extractive institutions can become counter-productive for the colonizing power. You can't extract value-added from service workers the same way as you extract resource rents. One simple reason is that educated workers migrate, resources don't.

Thanks to Abiola Lapite, a reminder to think before writing! But nonetheless I think some of what I said still stands.

These countries did not become "communist" until the 1970's - and that process led to civil war. By the time the civil wars ended the cold war itself was coming to a close. The thought experiment necessary is if Eritrea had become independent (and broadly free market) how would it have developed compared to Ethopia?

Actually the more interesting factor wrt Angola and Mozambique is that the dominant local "Anti-communist" actor was South Africa. This impacted directly on the form that anti-communism took, as though it would play with southern African black states i.e. supply them with food, electricity oil etc. - it was most definitely not in its interests to have successful majority states.

"Interesting, but the history of the Carribean suggest that Cuba did not fulfil this role (although the dynamics are clearly different!)"

Yes, for example, the landlord class was not only not decimated in other Carribean and Latin American countries, that class was directly connected to US business interests in most cases, and in some cases (United Fruit) was a US business interest. In Latin America, the US was in a position to counteract Communism more directly by military means and did so.

Two points in relation to Taiwan: First, the KMT "decimated" the landlord class with a land to the tiller program in the 50s that gave them cash and shares in state industries for turning over much of their land to the tenants who were farming it. Second, Taiwan is not ethnically homogeneous. The KMT (essentially an alien regime) brutally repressed the locals (particularly the majority Southern Min speakers) after the February 28 Incident in 1947. The KMT was afraid of an incipient Taiwanese nationalism. Therefore, in addition to excluding "Taiwanese" from political power, the KMT also attempted to stamp out the use of Southern Min on the island by banning its use in the educational system and the media. The ethnic tensions between the "mainlanders" (waishenren) and the "Taiwanese" (benshenren) are still being played out today--see Taiwan's recent presidential election.

Dr. DeLong:

The “Reversal of Fortune” thesis was a needed corrective for the overeager geographic determinism of Sachs and his predecessors. To say that “if you are on the equator you are probably destined for failure,” is not only provably wrong, but strangely (for an economist) dismissive of human creativity.

However, the thesis put forth by Acemoglu et al-–that good institutions, not geography, are the basis of societal wealth–-does not stand up to scrutiny. Recall that in the absence of comparative wealth data, Acemoglu et al use historical incidences of urbanization and population densities as proxies for societal wealth. Buried at the end of the paper (in Figure 3) is an assumption I find suspect: that throughout human history, individuals have lived in cities for the same reasons they were living in cities in 1900 (the earliest year for which the authors could find broad comparative data). In the text, the authors note that cities exist as centers of trade. Given the politico-economic organization of the world in 1900, such an assumption is not invalid.

Prior to the European expansion, however, most of the world’s cities did not exist primarily as centers of trade. Cities instead existed primarily as 1) a means of provisioning and sheltering the government, 2) facilitating the performance of religious functions. Outside the European cultural area and even within it, the distinction between “good” economic institutions and “bad” economic institutions was not meaningful. Any institutions, even value-destroying ones, were sufficient for the establishment of great cities.

For the most part, the European expansion of 1500 did not replace good indigenous developmental institutions with bad European extractive ones. By wiping out indigenous governments and religious organizations, the European invasions eliminated the reason the cities had existed at all. Due to their data bias, Acemoglu find that under European rule the non-Europeans became poorer—i.e., less urbanized. In truth, they only became less urbanized, full stop.

As for the examples cited in the dialogue--South Korea, Taiwan and Hong Kong—Glaucon’s original proposition is the correct one. These economies have developed without “good” institutions. Indeed, are not the “good” developments Thrasymachus cites as the basis for the later economic rise of South Korea and Taiwan—the murder and dispossession of the ownership class and U.S. military protection of dictatorial governments—just the sort of “goods” that would have sent Edmund Burke grasping for a quill?

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"Second, Taiwan is not ethnically homogeneous."

Strictly speaking, neither are Hong Kong and Singapore, but "homogeneity" is a relevant thing, and using a Herfindahl-index measure of ethnic fractionalization, even Taiwan looks like a paragon of homogeneity by comparison with nearly every state in sub-Saharan Africa.

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"South Korea, Taiwan and Hong Kong—Glaucon’s original proposition is the correct one. These economies have developed without “good” institutions."

That claim is simply contrary to the truth, at least where Hong Kong is concerned. The British may not have bequeathed (or rather, burdened) Hong Kong with an expansive welfare-state, but two things their rule *did* provide were stability and the rule of law. By comparison with most places around the world, Hong Kong was a leader on both of those institutional measures, at least until the Communist Chinese took over and started to undermine them in 1997.

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I always argued that one of the reasons that Taiwan and S. Koreas were the great economic development sucess stories in the last half of the 20th century was their exposure to the Japanese education system in the 1st half of the 20th century.

In the long run did they benefit from the destruction of the traditional power structure by the Japanese?

>>>That claim is simply contrary to the truth, at least where Hong Kong is concerned. The British may not have bequeathed (or rather, burdened) Hong Kong with an expansive welfare-state, but two things their rule *did* provide were stability and the rule of law.<<<

And it gave exactly the same gifts to Nigeria, Pakistan, Guyana and Zimbabwe.

Unhealthiness: Taiwan and Hong Kong are both roughly at the margin between subtropical and tropical -- like New Orleans or Tampa, but not like San Juan or Havana.

Extraction in Korea: During a period of heavy Japanese industrialization prior to WWII, the Japanese levied heavy taxes on white rice sales in Korea and used at least some of the revenue to buy white rice in Korea for shipment and sale at (lower) fixed prices in Japan, augmenting the supply in the home islands. In the aftermath of WWI there had been rice riots in Japanese cities due to high prices and shortages. Predictably, the tax/subsidy scheme was a short-term fix that created other problems, but it did get a bit more rice to the Japanese cities where former farmhands flocked to factories.

Some forms of resource extraction (logging and mining) do not need to invest anything significant in the local area, and by and large they have a negative effect (pollution of all kinds, destruction of ground cover and watersheds, heaps of slag and slash.) The model is to get everything there and leave without leaving anything behind. Internal evidence of this can be seen in West Virginia, Montana, and Idaho. International examples are plentiful.

On the other hand, since these resources are fixed in location, resource rents can be taxed by the locals and used to build up local infrastructure, and state intervention can also help keep wages high. Scandinavia and Minnesota (oil, iron-mining, and lumber) are examples of this. (I have read that in 1900 Sweden was not significantly more prosperous than Poland, but they leveraged their resource wealth into a welfare state and an educated population.)

American conservative policy and ideology, nationally and internationally, all are bent on promoting the West Virginia extractive model over the Minnesota/ Scandinavian one. This has been a powerful, though not always dominant, theme in American foreign policy.

To me the results are the test of theory here. Free-market ideologues identify The State with robber barons controlling territory by force and extorting rents. In some sort of ancestral way, the robber barons may ultimately behind The State in Minnesota dn Sweden, the way surgeons ancestrally were barbers too, but to me the Swedish and Minnesotan results look better in every way than the West Virginia results.

At the same time, there is a military aspect to this. Peoples located near resources of the extractible type do not benefit much unless they have a strong, honest government which is militarily able to protect itself --imperialism was/is not completely imaginary.

Besides infrastructure, the Japanese built strong educational institutions in Taiwan to support their development of the island as a key source of agricultural goods. This was a key foundation of Taiwan's first post-colonial success: exporting prepared foods. When the mainlanders came afterwards with more industrial technologies, money, and US support, there was a strong foundation to build upon.

US troops based on the island through the 1970s was also important, as in Korea.
Finally, the key for both was the US accession to their strict import subsitution/all exports policies, which hasn't been permitted other developing nations.

Singapore is completely different. Its strength has always been entrepot business, government investment in technology notwithstanding.

It's well-established how a developing country can optimize its growth path:
(1) Law and order, with limits on abuses of state power;
(2) Heavy taxation of Ricardian land rent.

Spencer, you're saying learning in Japanese in school some how helped the economy?
That's pretty silly thing to say, especially since the Korean economy didn't really pick up until the 1970's and 1980's.

When one compares East Asia with Africa, one must take into account profound cultural differences. Confucianism at least has honest and efficient administration as an explicit ideological ideal, as well as high value placed on education. By the way of contrast, the dominant "ideology" in Africa was one of solidarity at tribal and extended family levels, while education was a novelty.

Second difference is the tradition of sophisticated enterprenourship which is perhaps older in East Asia than in Europe. Western ideas were quickly adopted by people who were familiar with very similar concepts.

In 20th century cultural differences had much more profound effect than climate etc.

By the way, some African countries are quite homogenous ethnically: Somalia, Malawi, Rwanda, Burundi, Zimbabwe and Botswana. Only Botswana is a success story.

Rwanda and Burundi are "quite homogenous ethnically"?
Will someone please tell the Tutsi and the Hutu the good news!

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"And it gave exactly the same gifts to Nigeria, Pakistan, Guyana and Zimbabwe."

No it didn't, which is exactly the problem. I should know, being of Nigerian origin ... The British left the country in 1960, which is when things started to go downhill. I'd pick my examples more carefully in future if I were you.

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"Confucianism at least has honest and efficient administration as an explicit ideological ideal, as well as high value placed on education. By the way of contrast, the dominant "ideology" in Africa was one of solidarity at tribal and extended family levels, while education was a novelty."

Are you done spouting your ignorance about "Africa" yet? Are there any more movie-derived stereotypes about the "dark continent" of savages with bones in their noses that you'd like to get off your chest?

As MTC pointed out, what you wrote about Rwanda and Burundi is just too ridiculous for words, and I'll add that the Ndebele of Zimbabwe would certainly be pleased to know that theirs is as homogenous a country as Mugabe wishes it were.

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You guys have zeroed in on the target and this is what it has been doing and this is what the target should look like after the verdict is in,

http://americafirst2004.blogspot.com/2004/08/welcome-to-my-dream-my-nightmare.html

and

http://americafirst2004.blogspot.com/2004/08/reasons-for-world-wars.html

and

http://americafirst2004.blogspot.com/2004/08/china-syndrome-cbs-news-60-minutes.html

Is everybody in? Let the show begin...