Economics -- Country Trends


Figure 1.--This 1911 photograph shows breaker boys at the Hughestown Borough, Pennsylvania Coal Co. in Pittston, Pennsylvania. The youngest boy was Angelo Ross. The and other images by Lewis Hine documented child labor in early-20th century America. They are often used to show case the failure of capitalism. Often lost in assessing these images is a series of surprising facts. 1) Most of these boys are from immigrant families whose lives were substantially better in America than in the countries from which they came. 2) In most countries of the world, children working was the normal course of life. 3) Only in America and a few European countries were these images starteling. 4) Many native born Americans came from families that only a generation or two earlier were in the same economic position or worse than these immigrant boys. 5) At the time these photographs were taken, more American children were attending school than in any other country except perhaps Germany. 6) America at the time had the highest living standards in the world. 7) American capitalism provided the wealth to end industrial child labor within a few years after these photographs were taken.

We want to look at the economies of individual countries. The ecomonies of these countries are closely intertwined with their history. Thus some basic ecomomics information is needed for our historical assessment. This is a major undertaking that will take some time to undertake. We will comcentrate on the larger countries, including America, England, France, Germany, Italy, Japan, and Russia. The success of each of these ecomomies was strongly correlated with the adoption of free market capitalist systems. Despite the unrefutable evidence of this, it is interesting to note the number of countries that fail to implenent free market econommies or place limits on free markets. Two of the most notable are the remaining Communist countries (Cuba and North Korra). Here political concerns explain the maintenence of failed economic policies. It may sound strange to Americans that a country does not pursue policies to benefit its people, but in fact many countries pursue policies to benefit the regime and its supporters rather than the population as a whole. This arrangement may actually be the most common around the world because of the lack of democratic institutions. Other countries fail to develop a poliical and legal system necessary for free markets to flourish. African countries in particular have not been able to develop vibrant economies. Some countries like Nigeria have oil income to help finance ecomomic development, but seem to have made little real progress. Other countries do not have oil ot other major export income and are dependant on foreign capital. Developing countries (China and India) are now energing as major economies after pursuing disatrous socialist policies. Several smaller ecomonies (Argentina, Cuba, Poland, and Venezuela) are also interesting.

Africa

The African countries include many of the poorest countries of the world. The country is divided ethnically by the Sahara Desert. This has affected the cultural and economic development of the different countries. Most of North Africa was part of the Roman Empire and thus part of the Western world. Economic levels were comparavle to the rest of the Roman Empire. After the fall of Rome there was a brief period of Germamic rule, but the region was then conquered by Arab Islamic armies. We do not know much about the economy during the early period of Islamic rule. We do know that after the onset of the Renaissance in Europe that North Africa appeared a period of economic and cultural stagnation. Much of the region lived off of trade with sUb-Saharan Africa in wgivh the slave trade was very important. Another major part of the economy was Mediterranran piracy. While some individuals acquired great wealth, the great bulk of the population livedcin abject poverty. Many in North Africa at the onset of the 19th century lived lives that were little changed since the 19th century. The countries were colonized by the Europeans, in part to end piracy. Each of the countries achived full independence after World war II, convinced that ousting the Europeans would result in affluence. The results have been uniform failure. The reasins vary, but range from war and wasfeful military expenditures, socialist experiments, corruption, medieval religious traditions, bloated beaureacracies, and a failure to adequately develop the populations capabilities through education. Perhaps the key factor has been the failure to develop free market capitalism. Sub-Saharan Africavis somewhat different. Unlike Africa there was little contact with the Europeans until the Portuguese voyages of discovery to find a sea route to the East (15th century). The Europeans found African tribes that ranged from the stone age to the early-iron age in technological development. The primary interaction for the next few centuries was trade. The slave trade proved particularly disruptive. Few Europeans penetratyed into the interior. This changed as the europeans developed modern weapons, especually repeating rifles. The result was the European Scrabble for Africa which colonized almost the ebtire continent. The primary European interest was exploiting resources. This resulted in some infratructure development. Efforts to educate Africans varied from country to country, but was generally limited. This left the sub-Saharan Aftricans countries unprepared for indeopendence when it came after world war II. As in the North, the high hopes of independnce were dashed. These countries since independence have received over $2 Trillion from international doners. Except for Soviet Bloc assistance, this aid has been distributed on a non-ideological basis. The effortvhas been a total failure. [Kokorev] Most Africans or less well off than was the situation when the continent was still in colonial hands. The reasons for this range from civil wars and wasfeful military expenditures, socialist experiments, corruption, bloated beaureacracies, and a failure to adequately develop the populations capabilities through education. As in the north, perhaps the key factor has been the failure to develop free market capitalism. In both north and south, the new leaders of Africa failed to adopt democracy and free market capitalism that had made Europe so prosperous.

America, Latin

Latin America for much of its history has been a economic and backwater. Although colonized by Europeans over a century before North America, the region lagged far behind North America. Spanish conquistadores had very different motivations than the religious desidents that landed at Plymouth. Spanish and Portuguese authorities in fact banned religious desidents from the colonies. Even after independence, average incomes were far below North America. No important medical, technical, and scientific developments have come from the region. This was in large measure the heritage of the Inquisition as well as poor educational systems and a reluctance to invest in the region's human capital. The economies are largely based on resource extraction rather than manufacturing and processing. Very high import duties prevented the development of world class companies. Some countries (especially Argentina and Uruguay) in the early 20th century looked like they were preparing to make the transition to a modern developed ecomomies. Populist politicans making commitments to labor unions and other groups that the country's nascent developing economies could not support. The result was economic stagmation from which the countries have yet to emerge. Communist economic experiments in other countries (Cuba, Nicaragua, and Venezuela) have proven even more damaging, but continued to be persued for ideological and political reasons. Tghere is widespread sympathy in Latin America and a general failure to assess their ecoconomc history dispationately. Free market economics first attempted in Chile have proven remarakably successful and several countries (Brazil, Chile, and Colombia) have achieved notable ecomomic progress. A major problem in the area continues to be corruption and drug traficking, problem affecting several countries, including Mexico.

America, North

America and Canada dominate North America. Mexico is also located in North America, but for a variety of reasons makes more sence to consider as part of Lain America. This brings us to a a central issue. Why did North america develop so differently than Latin America. Why did Noth America become an industrial powerhouse able to support high living stabdards while Latin America remained largely agricultural and most of the population lsnguishing in poverty. The economies of America and Canada developed somewhat differently, but geographic and cultural issues resulted in many similarities. Britain attempted to restrict industrial development in its colonies. This ended with the Revolution. Canada of course did not join the Revolution, but benefited from the subsequent changes in British colonial policy. And after the Revolution, in the 19th century, British capital played a major role in the economic expansion of the American Republic. In both America and Canada, free market capitalism protected by British law generated rapid economic growth. America of course developed in own legal system, but ar\t its heart was English common law and the sabctity of private property. In addition, limited government and low taxes helped America expand from an agricultural base to surpass the ecinomies of all European countries. As a result, by the late-19th century, America was attracting large numbers of Europeans seeking indivuual rights, economic oportunity, and escaoe from military conscription. Although America was largely rural until the late-19th century, living standards even in the colonial era were above that of Europe. And an excellent public school system allowed Americans of humble backgrounds to achieve, The massive free market industrial economy that emerged in America would play a central role in defeating Imperial Germany, thecFascist powes, and totalitarian Communism. The crisis of the Great Depression, however , caused many Anericans to question free market capitalism.

Asia

China has economically dominated most of Asia beyond the Himilayas economically. The agricultural revolution and the birth of civilization occurred first in the Middle East. This occured later in China, but entirely independently. For most of history until the Renaissance in Europe, China was more advanced in most indicators of civilization than the the West. China was wealthier and more technologically advanced that the West. The Europeans found it difficult, both over the Silk Road and than the maritime Sice Route to find products to offer the Chinese for the silks and porcelin that were in demand in Europe. Thus bullion flowed from Europe to China. This relationship only began to noticeably shift as a result of the industrial revolution and the development of modern science (18th century). A key question is why did China was so advanced did capitalism and the industrial revolution occur in Europe rather than China. The Chinese imperial system resisted what they saw as fireign ways. The only vibrant Asian economy, largely because of capitalism, was Japan. And this enabled Japan to dominate East Asia until defeat in the Pacific War. In the 20th century despite the obvious success of capitalism, many in Asia turned to socialism. This occurred in India despite the British relationship (1946) and it occurred in China with the victory of the Communists (1948). China launched into a massive, radical experiment with socialism. Most other Asian countries at the time of independence after World War II also began socialist experiments of various types. The result was economic failure throughout Asia and in the case of China one of the most disaterous famines in history. . In several countries, living standards fell below colonial standards. A group of countries which became known as the Asian Tigers (South Korea, Singapore, and Taiwan) startked the world with what capitalism can achieve. Eventually China and India turned to capitalism and the result was to lifr more people out of poverty than ever before in human history.

Europe

Europe is a relatively small part of the world in both area and population. The key economic question which has to be asked is why modern economic methods first appeared in Europe allowing Europe for several centuries to dominste the world. Economomists have studied the history of European imperialism in some detailed, but much studied are the economic forced that led to European power and the creation of wealth that has allowed people to lead comfortable, fulfilling lives. The Renaissance and Reformation are both part of the story. A critical step was the incention of capitalism by the Dutch and its adoption by the English. At the time both were relatively small countries, dwarfed by the economies of France, Germany (Holy Roman Empire), and Spain. The economies of Europe were constricted for centuries by monarchial system which placed all kinds of restructions on property rights and free trade. The liberal movement of the 19th century was to end restructions on markets as well as to gain democratic rights and constitutiions limiting government power. As the liberals achieved their goals in Western Europe, ironically Socialist movements sought to impose different controls on property and free markets. In the Soviet Union the controls were basically absolute leading to industrial expansion that was not based on economic realities leaving modern Russia with essentially a third world economy based on exporting raw material. In Western Europe socialist policies have created welfare states that are unsustaninable and creating enormous drags in the economies of the countries involved. Ironically just as monarchial governments curtailed ecomomic growrh in the 19th century. Popularly elected governments now restict economic through heavy taxation and social welfare programs. And now the bill on the welfare systems financed by borrowed money has began to come due. One interesting economic approach is that of Germany which has persued more prudent fuiscal policies and has attemoted to promote a harmonious alliance between labor and capital.

Middle-east and North Africa

For an economist, the Middle East is a fascinating subject. It was in the Middle East that covilization was born. It was a happy marriage of climate, river valley, and natural flora that made possible the development of low-technology agriculture. And it was the increased production from agriculture that made possible civilization. This was a stunning economic and cultural schievement. Many important civilizations developed in the Middle East, including the Sumerians who in addition to agriculture invented writing. They were followed by the Babylonians, Egyptians, Assyrians, Hittites, Phonecians, Persians, and many others. The Indus FRiver culture was influenced by the achievemrnts in the Middle East. Arab culture rose in the Middle East in the Middle Ages. The Caliphate was a culture with stunning cultural achievements far beyond that of contemporary medieval Europe. The Ottoman Empire achieved considerable economic success. The important question which many economists fail to address, however, is why there was no significant economic achievements in the Arab World since the 12th century. For an area of such stunning economic and cultural achievements, how could time in economic terms virtually stood still for nearly a millenium. Certainly the Mongol Invasion was part of the equation, but wide aereas of Europe were also devestated by the Mongols. And even the Ottoman Empire was eclised by the Europeans beginning in the 17th century. In discussions with Arabs, Iranians, and Pakistanis there is a tendency amounting to virtually a cultural imperative to blame European colonialsim. The only problem here is that Eurooean colonialism was a relatively recent phenomenon. Many Middle Eastern countries until World War II had societies that were vurtually unchanged since the 12th century. And much of the progress that was achieved at the time of decolonialization came during the European colonial experience. Even today, few countries in the area have modern, productive economies. Most people in region live in poverty. Those countries where people do lead prosperous lives, do so primarily by exploiting oil resources. Economists need to answer the question as to why economic success has eluded the Middle East.

Oceania

Oceania is the smallest of the world's economic regions. This is because it is largely composed of many small islands with limited populations. The major exception is Indondesia, a vast archepeligo with a huge population and enormous natural resources. Socialist, statist economic policies and corupt military rule impaired Indonesia's development, but since the Asian financial crisis (1997), major changes including free market reforms have stimulated economic growth. Also included in Oceania is Australia and New Zealand, two countries with important natural resources and productive capitalist economies. The Philippines, the other important archipelago, has not achieved the economic growth hoped for after independence. The region has benefitted by first Japanese post-World War II economic miracle and now Chinese economic growth. Both Japan and China have grown ecionomically because of free market economic policies.

Australia


Indonesia

The economy of what is now Indonesia has been primarily agricultural based. This has meant primarily paddy rice culture. This means connections with the peoples of Southeast Asia and China. We are not sure just when rice culture was introduced in Indonesia. But the production of an agriculture surplus drew traders to the islands and spices added to the attraction. At the conjunction of the Indian and Pacific Oceans, traders arrived including Arabs, Indians, Chinese, and others. They both traded for the agricultural abundance of the islands as well as setting up posts for trading activities beyond the islands. The early Indonesian kingdoms were established by these trading groups. Also with trade, religions were introfuced to the islands. Important pre-European kingdoms included: Srivijaya, Mataram, and Majapahit. [Reid] Much of the Chinese goods reaching the West passed through traders on the islands. Chinese traders for the most part did not sail into the Indian Ocean. Marine archeologists have found suken ships providing valuable insights into the nature of the pre-European trade. The Europeans arrived (16th century). The Portuguese were the first to arrive. The Dutch who would eventually seize control reached the islands (1596). The Spanish seized the Philippines to the north. The Europeans did not at first change the basic economy of the region, but it did change who was involved in the trade. The Europeans gradually expanded their hold on the islands, but for the most part through the 18th century were primarily concerned with trade and did not move mich beyond the various fortified trading posts. As a result the basic economy of the islands was little changed. European reports provide some information on their commercial activities, but vurtually nothing about the larger island economy which was subsistence agriculture and boh local and inter-island trade. The Dutch East India Company (VOC) became a major factor for two centuries (1602-1795), but even so had only a limited number of trading posts in the vast archipelago. The Dutch presemce was focused on Java. Agriculture was expanded to coffee and rice. The VOC seized power from the Javanese rulers and gradually expanded control over the Javanese economy and trading activity. The VOC, for example sold Bengal cotton in the spice (pepper was especially important) growing areas. Vast profits were reported until competition with the English and the French Revolution resulted in the demise of the VOC. [Gaastra 2002] The French occupied the Netherlands and the British with the powerful Royal Navy seized control of the islands and other Dutch possessions. After the Napoleonic Wars, the Dutch regained control of the islands (1814). And Gradually the Dutch expanded their colonial role. This included improving the infrastructure. The economy remained, however, almost entirely agricultural. The discovery of oil in the 20th century had widespread consequences. It made the DUtch East Indies a major target for the Japanese in the Pacific War (1941-45). The Japanese heavily exploited the islands, causing a horrific famine. The American submarine campaign by 1943 , however, prevented the Japanese from using thec resources tio support their war effort. The Dutch attempted to restablish control after the War, but were eventually forced to turn over control to nationalists led by ??? Sukarno. Like other leaders during the de-colonization era, Sukarno turned to socialist, statist enterrises. The result was economic faulure exacerbated by rampant corruption. This was little changed by subsequent military rule. The Asian economic crisis brought an end to military rule (1997). The resulting democratic givernment, free market reforms, and responsible public financial managemdnt has brought enormous economic progress.

New Zealand

New Zealand sinces its inseption as a British colony in the mid-19th century developed an agriculturl economy. The south pacific has aopular image as a tropical parasise. New Zealand is far enough south that the climate is rather like North america abd Western Europe. This men that immigrants had access to large areas of land that could be farmed and ranched as in the home country. From the very beginning New Zealand was dependent on trade. They could produce large qunities of agricultural products, but wuth a small population, it had to be exported. And the New Zealand unlike neighboring Australia was very well wattered, making it an agricultural pardise. Like Ausrraliam New Zealand proved to be a lucky country. At first only non perishable products could be exported, but advanced in refrigeration during the late-19th century began to make possible shipment of meat and diry products, significantly expabding exports. Trade was primarily with Britain. World War II was a turning point for New Zealand. It became obvious that New Zealand could not dependend on Britain for its security. Befinning in the Coral Sea, that was provided by America (1942). New Zealand's economic ties with Britain were also affected. Britain joined the European Common Market, the modern European Union (1975). This forced Britain to reorder its Commonwealth ties. This could have severeky impaired the New Zealand economy except again for the United States. Part of the American Cold War effort was to promote freedom arond the World. This included economic freedom. And while socialism was failing in country after country, capitalism was suceeding in one country after another, beginning in Japan and then the Asian Tigers followed by China and India. The result was the greatest explosion of wealth in human history. In little more than a generation , some 1 billion people were thrust from abject poverty to the prosperous middle class. Thus while export opportunities were closing in distant Europe, New Zealand was perfectly lovated to take advantage of rapidly expanding Asian markets. Since World War I, New Zealand led by the Labour Party gad been building a socialist welfare state. This was done in democratic context that also valued private propertyand property rights. Thus New Zealand Goverment pursued economoic policies that provided for a high degree of economic freedom. Only Hong Kong and Singapore have higher economic freedom rakings. And New Xealand Governments in contrast to the United states and Western Europe have proceeded prudent fiscal and monetary polocies. Thus despite a socialist wlfare state, New Zealand has created a favoralble environment for entrepreneurs. And since the rise of Asian economies, New Zealand has developed a strong tourist industry, a new manufactiring sector. Energy was a drag, but developing the country's geothermal potential and a decline in oil prices, again thanks to Anerica, has guven the economy a boost.

(The) Philippines


Sources

Forelle, Charles. "A nation of dropouts shakes Europe," Wall Street Journal (March 25, 2011), pp. A1, 14.

Johnson, R.W. South Africa's Brave New World (Overlook: 2010), 702p.

Kokorev, Vladimir. "SMEs or NGOs: Who can salvage Africa's economy?" AfricaNews.com (October 28, 2010).

Organization for European Econiomic Cooperation and Development (OECD). Statistics.







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Created: 7:01 PM 12/3/2009
Last updated: 5:40 PM 8/9/2017