Economic Development is no sure thing

One of the writers who has really influenced my thinking has been the great British economist P.T. Bauer. He beautifully argues that central planning does not produce wealth. Instead, organic networks which result from the interaction of millions of independent individuals do a far better job of allocating resources. The formation of such networks depends on the ability of societies to generate human capital which, as Francis Fukuyama writes is seen the ability of people to come together to form voluntary associations, such as neighborhood groups, clubs, volunteer associations, churches, corporations and on the largest scale, societies.

Unfortunately many “developing” countries lack this capacity. The reasons for this inability range from issues of property rights and the respect for the rule of law, how competition is valued over cooperation, issues of interpersonal trust, the overemphasis on family over the extended society, attitudes toward authority, control over uncertainty, as well as a number of other factors.

The term “developing” suggests that there is a process that will inevitably lead towards a final status among the developed nations through the panaceas of economic engineering as though it a foregone conclusion. However sometimes development may not be in the cards as evidenced by billions of dollars of ineffectual aid.

While many economists may wish to overlook the messy issues surrounding culture in favor of more tangible variables, doing so is a mistake. Culture has very deep roots and a very strong influence. Bauer himself is very clear on the idea that in the end it is human capabilities that decide if economic development will ever happen. By looking at cultural pitfalls and concentrating efforts at reform in those areas, as well as concentrating efforts at creating the sort of conditions where people can be free to function as independent decision makers in a market order, development’s chances can only be improved, though never assured.
The fundamental issue here is whether a society can truly organize itself into a network conducive to development. Not through central direction but organically from the grassroots. Because it is only through such spontaneous self-organization that a truly complex society ready for development can eventually arise. The eventual success or failure of certain nations labeled as developing, and certain ones already hailed as the next great superpower may more realistically be ascertained when looking at them through such a lens. I personally remain skeptical.