I guess I must have been in a cynical mood because after reading Danika’s blog posting on productivity all I could think of were the things that prevent countries from being productive. There are many good ideas that would improve developing nations but there are still road blocks in the way. I am also not an expert in economics or have I taken a class in it (besides this one I suppose) so I apologize for any logical fallacies but constructive criticism is always helpful.
It is true that every country has a comparative advantage in something but can other countries impose regulations and tariffs that take away from this advantage? Or maybe they make the comparative advantage not as profitable as it could be. For my expert study I have been looking at the effects of agriculture subsidies in America and their effect on developing countries, mainly Africa. In Africa their main trade is agriculture products and because they are a developing nation much of the farming is done by hand and there is a lot of manual labor involved. Compare that to the huge farms that are run by advanced technology and filled with pesticides and fertilizers that make sure the crop potential is at maximum. More importantly add to this the massive amounts of agriculture subsidies (usually paid to big farms who produce crops like corn, cotton, and rice) that drive down produce prices. These low prices that we usually think of as a good thing makes it unprofitable for many African farmers and makes it really hard to compete in trade. In fact the prices are so low it is a lot cheaper to actually import food rather than get it domestically. As stated in the ‘NPR:Africa’s Lagging Development’, “…cheap, subsidized powdered milk from Europe has flooded West African markets. If you go through the countryside in Senegal or Mali, you won’t be able to find local milk… because the powdered milk has destroyed the whole dairy sector in West Africa.”
In addition, despite internal improvement in some African countries such as Mozambique the NPR series stated, “Cotton exporters say this part of northern Mozambique should be able to sell cotton at competitive prices. It has plentiful rainfall. Labor, at about $1 a day, is cheap. The main roads have been rebuilt after a lengthy civil war and are in excellent shape, by African standards. There’s a functioning railway linking the area with a port on the Indian Ocean. But growers complain that they’re barely making a living from their crops, and in recent years, several large cotton companies have gone out of business.”
So how can hard working and highly productive (for what they have) compete in a global market and defeat the cycle of poverty if even their comparative advantage is doing them no good? How do they break the cycle when they’re forced to be dependent on imports from other countries in order to survive?
Not only are there economic factors that prevent developing countries from becoming more stable. If you haven’t read the article “The World is J-Curved” by Ian Bremmer (it is tagged under del.icio.us bookmarks) I highly recommend it. To quickly summarize the idea, “Imagine a graph that charts a country’s stability on the vertical axis and its openness (both within the country and to the world) on the horizontal one. If each nation appears as a point on the graph, the resulting pattern looks very much like the letter J. Nations higher on the graph are more stable; those lower are less stable. Nations to the right of the dip in the J are more open; those to the left are less open. This simple J curve captures many of the dilemmas inherent in global politics today.” The article goes in greater detail but if this J-curve is real then the shift from being a closed and stable state to an open and stable state includes going through a period of instability. Many countries still struggle with that shift and some never quite make it so with the possibility of failure many countries are unwilling to open up.
Not to say that many of these things can’t be overcome but right now these are some of the things that I believe prevent developing countries from become productive countries. Isn’t pessimism great?