Books on Economic Development
This is a modest collection of books that have helped me understand a bit how the economics of development works. Our parish has a long term relationship with a town in Nicaragua. We have been building this sense of solidarity with them for 25 years. But their economic and social development, their ability to move forward was not really been helped much by our efforts until recently. So I have been reading books related to development and the differences between rich and poor nations. These few books have helped me a bit -- see what they do for you.
Guns Germs and Steel by Jared Diamond.
This is an attempt to explain how different parts of the world came to develop social and technological innovations prior to other parts. The author does a grand sweep of history, using archaeological, linguistic and genetic studies, to map out the development of societies over the entire globe.
The basic premise is that the available resources in a given area are the key determinants as to future development of that area. The suitability of domesticable crops gives rise to agriculture. The availability of domesticable animals enables a more rapid social development. The terrain, climate and other geographic barriers assist the spread of ideas or curtail their movement.
The fertile crescent gave rise to one of the earliest agricultural societies primarily because of the availability of easily domesticated crops.
As food production supported more people, then a more complex society developed, with role specialization and the ability and need to develop other technologies, such as writing, metal, navigation, etc.
The book is full of amazing anecdotes recounting how various peoples have fared around the globe. For example, in trying to explain why New Guinea did not develop sustainable agriculture on its own, others have premised that the "primitive" peoples there simply did not know enough about the available fauna. In reply, the author describes his own experience of being stranded in the jungle without food. One of his group went out and collected some mushrooms. The author was concerned that these might not be edible, and began to explain to his friend about poisonous mushrooms. The friend went on to explain that there are over 70 varieties of mushrooms in this area, and described the characteristics of each of them. This one was certainly edible, and only a stupid American or European would not know such things. The point being that people who depend on being able to find food, a hunter-gatherer society, develop a great understanding of the local crops.
It has a description of the Spanish capture of the Inca Emperor that is priceless. 18 Spaniards captured the Emperor in the face of thousands of his troops. The Incas had never encountered weapons and tactics used by the Spaniards. They were not able to deal with them.
The book has had some criticism in that it seems to discount the role of culture -- and that is its weakest aspect. In the final chapter, the author indicates the potential role of culture and decisions by "great men", but he states that there has been very little study of this to this point. And the remnants available from pre-historic times prior to the invention of writing do not generally include a robust description of the prevailing culture.
This perspective offers a great balance to the one adopted by Hofstede in Culture and Organizations. Hofstede is just describing what is there today. Diamond is attempting to understand where it came from. The prevailing culture is there because it worked well for thousands of years to enable humans to survive in the conditions of the local area.
The author argues in his final chapter that history should become more of a science -- analyzing trends and finding laws governing human development, as do other sciences. His work certainly represents a major start down that road. And, personally, I would have enjoyed all of those history classes a lot more if they had taken this perspective - trying to understand how we got to where we are, rather than the rote memory of isolated events and dates.
Wealth and Poverty of Nations by David S. Landes.
This author studies the history of development as a social evolution. It expands dimensions that were not considered by Diamond, and he has even better stories. He gives greater consideration to the evolution of culture and customs and economics, beyond geography and the availability of plants and animals.
For example, Diamond talks about the Chinese failure to expand their empire beyond their shores. He ascribes it to the decision by one Emperor to destroy all shipbuilding, because the Emperor he deposed escaped on a ship. That story is true, but there is a great deal more to that.
Landes explains the fuller background. In ??, before Columbus set sail from Europe in 3 tiny ships, the Chinese sent out a fleet of ?? ships and ?? men. The purpose of this voyage was to announce to the other kingdoms of the world the glory that was the Chinese Empire. They brought gifts, and carried ambassadors to greet other kings and emperors. The fleet touched at various ports, working their way around India and down the coast of Africa. They got about half way down, and they decided that there simply were no other kingdoms worthy of China's attention. So they turned around and went home. That was the end of Chinese exploration.
China was a highly controlled economy and social structure. The Emperor owned everything, directed everything. There was no initiative outside of his wishes that would drive further exploration.
Portugal, on the other hand, was a tiny little country tucked up against Europe. The Portuguese set out to explore the coast of Africa, primarily for commercial gain. The slaves and spices and woods that they found and brought home, promised great wealth. The ship owners could get rich, and even the common sailors on these ships did their own trade with things from the foreign ports that they could sell back home. They were driven by capitalistic greed.
As a result, Portugal settled colonies on every coast of Africa, explored India and Japan and China. This tiny country had a far flung empire, whereas the great empire of China never strayed far from its shores. That cultural / social difference came from centuries of a different way of thinking of their economy and their personal fortunes.
For more on culture, see my comments on Hoffstede's book, Cultures and Organizations.
Development as Freedom by Amartya Sen.This book is a tougher read, but I loved it. The author is a Noble prize winning Economist from India, who is currently teaching at Cambridge. His basic premise is that Freedom is the primary engine of development, and the primary requirement. Others have theorized that a certain level of economic development is necessary before a society can afford political and economic freedom, but he argues just the reverse. He uses numerous economic studies from India and China and other developing nations to prove his point. It is essential to provide health care, education and land reform as the primary means to development, not the end product. It is the enhancement of human capabilities that fosters development. Resources play a role, but the human capital is key.
He argues that "human rights" should be seen as a set of ethical claims, which are not identified with legislated legal rights, nor with some system of inherent or "natural rights". It is a system of ethical reasoning, where we decide, as a society, that there are things that every human should have, even though we cannot deliver those at the moment. Basically, we identify these because society works better with them in place. The book is an attempt to establish by means of empirical evidence that personal freedom is the basic right that supports human development, and that the amount of freedom or personal capability we enjoy is more important than any economic gauge.
Personal freedom includes these things: (p.38)
Political Freedom, to determine who should govern, and with what principles, freedom of speech, political parties, etc.
Economic Facilities, to utilize economic facilities for consumption, production, exchange, the availability and access to finance.
Social Opportunities, the arrangements a society makes for education and health care, and similar services that enhance participation in economic and political activities.
Transparency Guarantees, the guarantee of a basic level of trust and honesty, upheld by openness and disclosure.
Protective Security, the social safety net to prevent any segment of society from being reduced to abject misery, starvation and death.
The book is full of interesting facts that make the point. For example, people often remark that the poorest person in the United States is better off than most people in the world, who survive on 1 or 2 dollars a day. That may be true in terms of the things they own or consume, but is that the true measure of the quality of life? In fact, African Americans have a shorter life span than the poorest province in India, or most of China and Sri Lanka. It is also a fact that black women in the US have a shorter life span than white women, even after adjusting for income. What is that about?
In a similar vein, he contrasts the economic development of India and China. Two very different worlds, both developing at an accelerated rate. He praises the more open democracy and economic system of India, but he also argues that China is better prepared for real development because of their prior investment in education and health care. Their population is prepared to take part, whereas most of India's poor is not ready for development.
He also makes the case that women are key to economic development. The UN Millennium Project has formally recognized this as well. He argues from population statistics that there are more than 100 million women missing from societies that suppress the role of women. Their cultural practices do not value women and the result is their untimely death, removing them from the development equation, and depriving society of their contributions. Africa, Arabian states, India and China all have this tendency.
He makes a great case (p. 132) that government assistance should be based on capabilities, not on income. Income can be hidden, versus the basic capabilities of the person in terms of their education, nutrition and health. This focus also shifts the focus of the recipients from income to capabilities, and people tend to value the education and health care for what it contributes, versus money for its own sake. It also works better to provide assistance that comes with the requirement to also contribute. Free gifts are not as valued, and do not produce the results that hard work for the assistance will provide. It assists the person, and also lays the foundation for economic development for the entire society. Public work projects, even for low income, produce better results than grants.
He has a few words about our capitalistic system that I think are worth quoting: (p. 279)
"(It is argued) that human beings are uncompromisingly self-centered and self-interested, and given that presumption, the point is sometimes made that the only system that can work effectively is just the capitalist market economy. However, this view of human motivation is not easy to sustain in terms of empirical observations. Nor is it correct to conclude that the success of capitalism as an economic system depends only on self-interested behavior, rather than on a complex and sophisticated value system that has many other ingredients, including reliability, trust, and business honesty (in the face of contrary temptations). Every economic system makes some demands of behavioral ethics, and capitalism is no exception. And values do have considerable reach in influencing the behavior of individuals."
Or, it takes a lot more than greed to make a capitalistic system work. I have seen arguments that the basic honesty of the early Quakers gave Western capitalism the basic values that make it work. It is clear to me that the majority of the planet lacks this fundamental trust that underlies most of our economic transactions. I am also somewhat persuaded that this is currently being eroded in the U.S., to our great loss. You can't have a game, even a highly competitive game, if the players don't follow the rules.
The Soul of Capitalism by William Greider.The primary thing this book delivers is a sense of hope. Capitalism is not a perfect system, and it is still evolving, developing. He surveys many different areas that are working to modify our economic system, as it has been modified and tailored for the past 200 years.
One major change needed is that public corporations adopt a much more democratic structure - where the shareholders are actually in charge of something. This sounds like a crazy idea, but so was democracy in the face of the divine right of kings. It was unthinkable that any king would support the dea that the common folk should be asked what they think about any issue. And to think that they might actually select a leader would be mayhem. That is about where we are with corporations today. But it is doable to make them more amenable to the public's interest, and less focused on executive compensation -- which seems to be the prevailing trend.