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P.T. Bauer on development economics and comparative institutional analysis
09 Jan 2015 Leave a comment
In Praise of Cheap Labor: Bad jobs at bad wages are better than no jobs at all – Paul Krugman
28 Dec 2014 Leave a comment
in development economics, growth disasters, growth miracles Tags: development economics, growth disasters, growth miracles, Paul Krugman, sweatshops
Benjamin Powell, In Defense of “Sweatshops”
29 Nov 2014 1 Comment
in applied welfare economics, development economics, growth disasters, growth miracles, human capital, labour economics, labour supply, occupational regulation Tags: Ben Powell, development economics, do gooders, sweatshops
A tale of two cities – Hong Kong’s and Singapore’s different paths to prosperity
13 Oct 2014 Leave a comment
in development economics, entrepreneurship, industrial organisation Tags: Alywn Young, development economics, Hong Kong, industry policy, industry targeting, rent seeking, Singapore, tale of two cities, tyranny of numbers
Hong Kong and Singapore had different parts to prosperity. Alywn Young found that Hong Kong had made real productivity gains, but Singapore grew by a massive dose of savings and investment, including foreign investment.
For most of the post-war era, the Hong Kong government adopted a policy of minimal intervention. the government of Singapore has pursued maximalist policies involving widespread state participation in economic activity and aggressive industry targeting policies.
The share of investment in Singapore’s GDP rose from 9% in 1960 to 43% in 1984, while Hong Kong’s remained steady at about 20%. Productivity growth in the aggregate non-agricultural economy was a miserable -0.3% in Singapore and 2.3% in Hong Kong.
What does this mean in practical terms? Real consumption, real consumer spending, per capita in Hong Kong is 20% or more higher than in Singapore!
Hong Kong actually enjoyed their prosperity. Robert Barro explains this in a comment on Young’s paper:
In 1985, when Singapore’s per capita real GDP was 102% of Hong Kong’s, the consumption was only 70% of Hong Kong’s.
To put it another way, Hong Kong’s per capita real consumption grew by 5.9% per year from 1960 to 1985, about the same as for GDP, whereas Singapore’s grew by only 2.8% per year, much less than GDP.
In terms of output per capita and output per worker, the growth of Hong Kong and Singapore are equally impressive. Hong Kong does much better in terms of productivity growth growth.
Hong Kong did not require as rapid capital accumulation as Singapore. Since capital accumulation is financed either by domestic saving or foreign saving, people in Hong Kong can afford to save less or borrow less from foreign economies. Saving less now means more consumption now.
In the case of Hong Kong, their living standards are far superior to Singapore’s. The government of Singapore wasted a good 20 to 30% of national income on industry targeting and compulsory savings.
Hong Kong experienced rapid total productivity growth, while Singapore experienced no improvement whatsoever in total productivity during its East Asian Tiger years. Young (1992, 1994, 1995) demonstrated that from 1967 onward total factor productivity growth in Singapore was next to nil, and for significant parts of the period most likely negative. Only productivity allows a nation to support and enjoy high wages.
Paul Krugman on those soulless multinational corporations doing business in the Third World
06 Oct 2014 Leave a comment
Development economics in a nutshell: Gordon Tullock developed his rent seeking insight when he was a diplomat in China
06 Oct 2014 Leave a comment
An Austrian school economist visits Tacloban
12 Mar 2014 Leave a comment
in Austrian economics, development economics, economics of natural disasters, liberalism Tags: capitalism, development economics, economics of natural disasters, Liberalism, Philippines, Tacloban
When we landed at Tacloban airport just before New Year’s Day, the devastation from Typhoon Haiyan (Yolanda to the locals) was everywhere. Most of the walls of the airport were missing but the supporting beams survived and there was a make-shift roof. We drove for an hour before the damage was no more than lost roofs.
At the airport, there were no barriers between the departure area and the tarmac.
A little known use of those lost walls was stopping the jet engines blasting into the waiting lounge. No photo because I was too busy running.
The Tacloban airport is named after an uncle of Imelda Marcos. The city mayor is her nephew; you may have seen him on CNN. Other relatives of Imelda on the island of Leyte have been congressmen, provincial governors or town mayors in a dynasty that rotates between offices because of term limits.
The café next to the airport where I had breakfast when I was last in Tacloban in January 2012 was washed away, sadly along with its owner.
I remember reading the local newspapers in that café in January 2012. A feature story was about the private armies employed by local politicians. These private armies could be 40 strong. Cronyism and a lack of a rule of law could explain why Leyte is among the poorest islands in the Philippines.
All the surrounding restaurants were wiped out. But the food vendors are back at the airport – the entrepreneurial spirit is very resilient! Tacloban airport was one of the few places where I could get diet coke in all of Leyte.
The only upside of the typhoon was Imelda’s large sea-side walled compound was washed away. There is a god: a vengeful god!?
We dropped in on a friend on the way to my parents-in-law. He had lost power. He said that straight after the typhoon, entrepreneurs were going door to door selling bottled water.
By the time we had arrived, everyone on the island of Leyte had received five-weekly rations of five kilos of rice and other essentials from the town hall. My mother-in-law had no need for this ration so she gave it to less well-off neighbours. Her town was not damaged much at all by the typhoon. They are on the other side of the mountain from Tacloban.
My in-laws living on an island further north of Leyte lost their roof and a wall. Terrifying.
Local merchants must find it hard to rebuild their businesses when everyone is getting food for free from the town hall many weeks after the disaster. This includes areas that suffered little damage.
The consular travel warning for all of Leyte was very ‘high risk’ – one below ‘avoid all travel’. Advised to be self-sufficient and be on guard for bandits, etc.
The owners of a very nice 5-room chalet at the other end of Leyte where my sister-in-law and her family stayed were most unimpressed by the over-inclusive consular travel warnings.There were many cancellations so their business was just ticking over rather than in a profit. Little wonder that the girl behind the makeshift car rental desk in the arrivals lounge at Tacloban airport did not seem to get much business when we arrived.
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