Thursday, March 22, 2012

How rich countries got rich...

image from
Anthem Press India

Today I started reading Erik S. Reinert's book "How Rich Countries Got Rich ... and Why Poor Countries Stay Poor". The title is already thought provoking, Reinert will discuss that the concept of a free market is actually a luxury, and that the currently rich countries have become that way exactly through a combination of government intervention, protectionism and strategic investment.

Visiting Peru in July 1967, during his last high-school summer vacation, he wondered why the country is so poor:
Most of the people I observed at work - the luggage handlers at the airport, the bus drivers, the hotel personnel, the barbers, the shop attendants - did not seem to be any less efficient than the people performing the same tasks back in Norway.
What is it about this "market" that rewards people with the same level of productivity with such different real incomes in different countries?

Just as now, economists were already claiming in 1967 that free trade would elevate all people out of poverty, that the allowance difference for rich and poor would be leveled out. This 'proven' economic theory has been repeated from 1760s, the 1840s and the 1990s:
If high-tech engineers and people who make a living washing dishes are placed in two different countries and start trading, they will suddenly obtain the same real wages?
I am about to find out, I have just started to read his book, but these starting theories sound already very promising.

In his own words:
If you take anything from this book, let it be this: if you want to understand the causes of American and European prosperity, study the policies of those who created it, not the advice of their forgetful successors.

I have found one incorrect reference though: in chapter 2 "The Evolution of the Two Different Approaches" talks about "post-authistic economics" on page 45, footnote 32 gives a link to Edward Fullbrook's website. This link is misprinted and should be , I hope this will be corrected in newer editions.


No comments:

Post a Comment

Related Posts Plugin for WordPress, Blogger...