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Eureka: The science of economic development
by Jay Gutman
2017-09-25 07:23:04
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South Koreans like to think Confucianism is what led the country from rags to riches. There's that, but there's also the fact that it's a country the size of Indiana with a population larger than that of Canada. That means a powerful army of human resources. There's also the fact that the country has mountains but the mountains are not steep which enables easy transportation from one part of the country to another, where no part of the country is completely isolated by a chain of mountains or a tropical jungle.

ec01_400_01There's also the fact that in the 1970s with the oil crisis and inflation in Europe many textile mills closed down and the industry was faltering due to inflation, debt, high wages and strong labor unions. When a factory closes down, kind of like when a spouse passes away, the demand for industrial products does not go down, just like the need for the surviving spouse to be fed and housed does not fade away. So suddenly Europe and North America needed a supply of industrial products that their failed industry could no longer provide, thus Korea, Taiwan, Japan, Singapore, Hong Kong and then China were providing.

The Asian giants did not steal European and North American jobs. They were just providing what the deceased spouse could no longer provide. It took a few years for Europe and North American to put its industry back on track, but in the 1970s and 80s the Asian giants had decent currency reserves and basiacally said they would loan the money to Europe and elsewhere if they were granted easier access to their products.

Now Europe and North America were trying to invest in new technologies, abandoning what some thought were old outdated industries. Now it was Asia's turn to experience what Europe had experienced in the 1970s, such as crippling debt, high wages, high land prices and a faltering industry that had trouble keeping up with all the innovation. Just like in Europe in the 1970s, Asians had trouble convincing their caviar eating, champagne drinking, yacht-loving CEOs that urgent meetings were needed to clean the mess.

I had said previously that corruption wasn't the only factor to slow economic development in Africa and Latin America. The problem with the two continents is there's a “corrupt” leader, you take him out, replace him with someone you think is clean, turns out to be corrupt again and the cycle never ends.

But if you look at how things really work, you have countries with an overwhelmingly young population, the kind that needs to be fed and bred, and when you sit in that presidential palace and look at those budgets you need to keep that young population educated, healthy and fed you realize you may need to cut corners otherwise you're looking at riots.

Now Africa and Latin America, along with South Asia should be the new East Asia. Low land prices (outside capital cities) along with low labor costs and struggling East Asian and European industries means the possibility for those continents to lead the world's industrial efforts. The reason is simple, as industrial products need to be cheap to be viable and need to find their customers to be viable. No one would buy thousand dollar phones and no one would buy hundred thousand dollar cars, or at least few would buy them. But with the land prices and high wages in East Asia and Europe along with an industry that has debts it's struggling to repay, industry would probably move to areas where it's easier for it to break even. There is a small variable that exists in Latin America and Africa that didn't really exist in East Asia which is high crime rates.

As for Europe, North America and East Asia the idea would be to focus on new, futuristic industries, that is the industry of the future. New technologies, life-changing technologies and so on. That is, if the “old continents” put their educated workforce to good use.

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Emanuel Paparella2017-09-25 11:25:52
There is another (humanistic) side to this coin of economy as a science. While it is true that Freud called his psychology a science and many economist also call their economic theories scientific, Freud had read Oedipus Rex and Electra and knew full well that "science" is a misnomer of sorts when applied to a being that is not so deterministic and is in fact quite unpredictable. Ditto for economic development. Perhaps "psychological and economic guidelines" may be a more modest and realistic term, less of a misnomer.

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