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 in terms of population. This is because it is largely composed of many small islands with limited populations. It covers a huge ocean area, but the land area of the islsnds is very small. There are two excrptions. Australia is a continent in itself, encoming a large area, but much of it is arid and the population small. The land aea of Infonesua exceeds that of all the rest of Oceania. The country is resource rich. The economy was largely sgricultural, but dince World War II has developoed a diversifuied modern economy. New XZealand is similar, although much smaller and better waterrd. Indonesia is 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 economically because of free market economic policies. The region has not experienced the phenomical growth of the Asian Tigers, but Infoinesiaa, Malaysia, and the OPhilippines have begun to report significant economic growth in recent years. Since World War II, most of the small island groups of the Central and South Pacific have emerged from cololonial trusteeship status to form independent nations. It is not yet clear if they are going to be able to develop successful, prosperous economies.

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: 3:05 AM 6/1/2018