How relevant are the lessons learnt from the historical growth process?

Due to differences between the initial conditions of the Developing countries NOW and the Developed countries, when they started their economic growth are the lessons we have leartn of limited relevance.

1. Physical and human resource endowments

Developing  countries are less well endowed with natural resources. Asia where half of the world’s population lives is poorly endowed.Even though Africa and Latin America are better endowed they need heavy capital investment to exploit these

2. Per capita incomes and levels of  GNP in relation to the rest of the world

Four fifth of the world  has the real per capita income that is on average lower than their counterparts in the 19th century. Secondly, today’s developed countries were in advance of the rest of the world and hence could take advantage of the strong income gaps between themselves and the other nations.

3. Climate

Most Developed countries are located in temperate climatic zones as opposed to the Developing  countries that are located in the tropical zone. Heat and humidity results in decline in soil quality and  depreciation of natural goods, lower agricultural  productivity, weakens regenerative growth of forests and poor health of animals.  It also causes discomfort to workers and weakens their health – it reduces their desire to engage in strenuous work – diseases like malaria etc. are concentrated in tropical areas.

4. Population size, distribution, and growth

In the earlier growth years the Developed countries of today experienced a slow population growth rate and as industrialization proceeded, population growth was mostly due to falling death rates – at no time the natural birth rate of Europe or North America was more than 2% per-a.  For the Developing countries however, the population growth rates are increasing at rates of more than 2.5 % per-a.

5. Historical role of migration

During 19th and early 20th century there was a major outlet for excess rural populations in international migration, which was both large scale and wide-spread, for instance, three major contributions to the labour scarce areas of North America and Australia came from the Irish, Germans and the Scandinavian.
International emigration till WW I was both distant and permanent whereas after the WWII it was mostly within Europe- over short distance and essentially temporary.
The same type of migration is not possible today because of large distances involved and the very restrictive nature of immigration laws in modern developed countries.

6. International trade benefits

During early 19th and early 20th century international free trade was called the engine of growth – however, today the developing countries cannot expand as rapidly  because:
The terms of trade have declined – that is the price that they receive for their exports is much less than the price that they have to pay for their imports.
The developed countries are so far ahead in terms of producing more competitive and new products that the developing countries cannot compete.
Developing countries of today also face various barriers from tariffs and non-tariff reasons- like import quotas, sanitary requirements and special licensing arrangements.
7. Basic scientific and technological research and development capabilities
90% of the Research and Development is concentrated in the  Developed countries and is focused on solving their problems.
Technological requirements of the Developing  countries are very different and require simple solutions.

8. Stability and flexibility of political and social institutions

The developed countries in their pre-industrial time were independent consolidated nation states able to pursue national policies on the basis of consensus towards modernization with ideals embodied in the notions of rationalism.In contrast many of the Developing countries have recently got their independence and have yet to gain political and social stability – to become consolidated states.

CONCLUSION:

No strong empirical evidence of convergence between the living standards of Developed and Developing countries.
Most important lesson to be learnt is the significance of technological, social and institutional changes that are essential for the long-term economic growth.

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