Book Spotlight #3: Prelude to Foundation

"Prelude To Foundation" 
by: Isaac Asimov

Quote Highlight: "Halfway through the speech, Seldon realized he was speaking to the Emperor Cleon, First of that name, and he felt the wind go out of him." - Asimov

When mathematicians put pen to paper they tend to be writing a thesis or some textbook... one certainly doesn't expect a novel to come to light. Asimov is the exception. Having recently watched the HBO adaption of the Thrones series, I had to try George R.R. Martin's books for myself. No surprise, the book series blew the TV adaption out of the water. The genre of science fiction was back in for me. I instantly moved on to try out Asimov, who is referred to as the "father of sci-fi". He starting writing around age 10 and was completing full blown novels by the age 19. He's penned hundreds of publications but a few of his series's have become famous, including "The Foundation Series." If you've seen the movie I Robot with Will Smith,you've seen Asimov's work, it's based off a book of his. Get the picture? Now let us turn to the Foundation series, starting with, Prelude to Foundation.

The series is set in a time so far into the future that humans have inhabited not just our solar system or even our own galaxy, but multiple galaxies. It's a time so far from our own present day that the human species is not sure where they originated from, with multiple planets claiming to be the original birthplace. Some even scoff at the idea that humans came from one single planet. Obviously this book will make you think. Hari Seldon is our main character for the novel, a 32 year old mathematician. It starts with this young Seldon presenting a mathmatical paper during a convention on the capital planet of all known existence, Trantor. To give you some scope, this planet is home to over 40 Billion people in this futuristic planet, a planet so large that dozens of "farm planets" are needed to feed all the people living on it. Seldon presents his paper on a groundbreaking theory. He claims that it is theoretically possible to start mathematically predicting future events, coining the term psycho-history (a combination of math, sociology, and history). Of course the main story unfolds in the events that begin to take place after the presentation. The entire galaxy is at stake as the repercussions from Seldon's presentation are felt all the way up to the Emperor himself. Combining futuristic world's, advanced technology, and still human characters with everyday human emotions, it's hard not to get sucked into this world. I did.

Asimov's writing style is especially appealing to me. He writes in a way that allows the reader to draw their own conclusions, or forces you to try and deduce what will happen next. At the start of each chapter, there is a blurb in italics that comes with a few sentences quoted from the "Encyclopedia Galactica." These passages are clearly from sections of the encyclopedia that were written far into the future of the current time period in the book. Usually, the passage is a reflection on what will come in the next chapter or on one of the characters. In this way, the reader is able to begin to ascertain new facts and outside information that is not available at the time of the story. It's almost as if there is a history book that was written about the story you are reading and you get to read it while the story is ongoing. I can't give specific examples without ruining plot lines, so I hope that explanation was enough.

I highly recommend not just this book but the entire series. However, this book will get your feet wet and let you see if its a style for you. Although the story-line is advanced, twisting and turning, the character developments are not the emphasis for Asimov. As the crowned "father of science-fiction" his writing really does live up to the hype. The novel is set in a complex world where complex decisions are made, however the humans still maintain normal emotions and personal relationships that make for a nice equilibrium of futurism while still being relatable.

The Bottom Billion

- A paper I wrote in the Fall of 2013 

The Bottom Billion

            The present age of globalization features unprecedented wealth around the world. In the past 30 years over two billion people have been lifted out of poverty in India and East Asia, a miraculous economic growth story. However, there is a part of this economic story that is less talked about, with much less to boast about. The less mentioned fact is that within the previous 20 years, there has also been a bottom billion of the world’s population being left behind, mainly in sub-Saharan Africa. Many countries have actually experienced a decline in economic growth since gaining independence, with some countries boasting a lower GDP per capita than they achieved in the 1970s, a literal reversal in living standards. Why have countries like South Korea and Taiwan being able to experience massive economic growth, even to the point of now being considered a developed economy. In the same time period as all of this amazing growth, countries in sub-Saharan Africa have shown little economic advance and not much room for optimism. First, issues such as ethnic fragmentation and the fact that the vast majority of Sub-Saharan people are destitute and poor may add to the economic feat that these countries face. Next, we must examine how weak states with very poor governance have contributed to the economic problems, or have been led to have weak governing bodies. Lastly, the political logic facing many sub-Saharan leaders forces many decisions to be made due to the incentive structure, leading to the earlier issue of poor governance coupled with policies that may be unfriendly to economic growth.

            Many may feel that ethnic fragmentation within African societies is surely a cause for warfare and violence. Especially after the now much publicized Rwandan genocide of the Tutsis by the Hutus in 1994 that resulted in over half a million people being killed. Today, over half of all Africans can be declared, “minorities at risk” meaning they face political repression and may face discrimination. However, as Paul Collier notes, “there is not much evidence of a relationship between ethnic diversity and the country’s proneness to civil war (Collier 2009). Yet, if you disaggregate the statistical evidence for how polarized the ethnic groups happen to be, there can be some correlation to the chance of war. So overall, ethnic fragmentation in Africa is not a leading cause of conflict, in fact it can be suggested that ethno political conflict is actually a product of poor governance and state failure (Packer Notes(a)). This leads to the crux of the problem facing most African countries and almost all sub-Saharan countries, governance, or a lack of.

            According to the most recent ‘Failed States Index’ collaborated annually; there are 20+ African countries with governments in ‘critical’ condition and another eight declared as ‘in danger’ of becoming a failed state (Sheldon 2012). This huge number of countries with little to no governance is not promising for future economic growth prospects. In order for there to be stable economic growth, a government is needed to provide public goods. These include infrastructure, security for the citizens, and lastly to protect private property from unreasonable and arbitrary seizure. Unfortunately, there is nothing that forces a leader or government to provide these goods, and in fact the incentives facing many leaders in sub-Saharan Africa can work in the opposite direction. A leader faces two distinct options because they control the means to violence, choosing to either provide those public goods mentioned above and protect the citizens, then earning his living through taxation of those citizens. Conversely, the leader can instead choose to prey on the citizens or leave them unprotected from violence (Packer Notes(a)). If a leader decides on the former, whether that is because he feels insecure about his political future or is just greedy and impatient, the citizens are forced to switch from productive activities to self-protection and thus end up worse off in the process. Featuring over 70 military coups in sub-Saharan Africa in the time between gaining Independence and the 1990s, it is no wonder that many leaders choose predation over protection seeing as they do not know how long they will stay in power. In this way, long-term economic growth is almost impossible to gain with a roving bandit government reducing the incentive of any economic productivity if it can be arbitrarily seized at any moment in the future. This leads to less economic growth and more resources going to protection and survival instead.

            The political logic for many of these leaders, as stated previously, can be skewed towards predation and to take on the role of a roving bandit. However, there are also domestic political factors that require leaders to cater to the winning coalition in order to stay in power. Regarding the choice between enhancing social welfare or staying in power by enriching a privileged few, Bruce Bueno de Mesquite said, “Honorable motives might seem important, but they are overwhelmed by the need to keep supporters happy, and the means of keeping them happy depends on how many need rewarding” (Bueno de Mesquita & Smith, 2011). This leads to clientalism and corruption within governments in the African countries, also contributing to the lack of economic growth. When a government first fails to provide infrastructure and other public goods for society, the focus can then concentrate on the resources within the country. This leads the leader of the country to divvy out the rents that the government is able to gain from the resources, using the money to buy up or coerce support for the regime. When the winning coalition of supporters for the leader is small relative to the size of the selectorate, it is easier for a regime to buy off and keep the support through spoils, private benefits and public projects that work as pork projects getting awarded to those in favor of government (Packer Notes(a)). As a supporter of Robert Mugabe in Zimbabwe stated rather candidly, “I am rich because I belong to Zanu-PF [Mugabe’s ruling party]” (Bueno de Mesquita & Smith, 2011). Many leaders partake in similar functions, rewarding those who support them and help them stay in power at the expense of the losing group or the public as a whole in the country. These policies can take the form of many bad economic decisions, such as, government licensing that protects established producers, subsidies to favored corporations, low cost loans to favored companies, and maintaining an overvalued currency that acted as a subsidy to urban manufactures (Packer Notes(a)). An economy that can grow and prosper over a long period of time cannot be sustained if crony capitalism is taken as standard, and every time a new government comes in power, the favored companies switch and wealth changes hands arbitrarily. Furthermore, as leaders feel that they are less secure, the rewards and incentives to protect the citizens and not switch over to predation decline. In extreme cases, some leaders even see infrastructure building as enabling a rebellion the means to move quickly against the government. For example, in Zaire, there was 90,000 miles of road in 1965, yet 30 years later there was only 6,000 miles of road left intact (Bueno de Mesquita & Smith, 2011). This was because the leader of Zaire, allowed only infrastructure that was beneficial to his regime, for example a road that would help him escape the country or allow his forces to maintain power, while destroying roads that would aid any sort of rebellion trying to be put together against him. The problem with this is that in order to stay in power, Mobutu was destroying any hope of economic growth within Zaire by not just providing public goods and infrastructure, but even worse by destroying them. The incentive for a leader unsure of how long he will be in power is to take as much as he can in the present before being overthrown, leading to roving banditry and uneven revenue streams. Together, this leads to a lack of good governance, and a lack of good governance can lead to failing states.

            Ultimately, the governing bodies in Africa can and do fail because they lack the means or ability to tax its citizens. This is important because a steady revenue stream allows a government to provide the public goods necessary to keep an economy growing. A government that acts as a stationary bandit, taking produce from a certain region continuously over time while leaving enough so that people still have an incentive to keep producing is much more effective than if the government acts as a roving bandit. If the government acts as a roving bandit, there will be a major one-time increase in revenue for that government followed by a precipitous decline. The increase occurs when the government initially steals the resources and rents it needs, this is quickly followed by a decline as the incentive to reproduce for the people has been destroyed. This is also where one can get into the lack of political accountability featured by many African governments that rely on resources for their revenue streams. As resource prices can be very volatile, so can the revenue achieved from those resources be just as likely to swing largely in either direction. First, with a revenue stream a leader does not have to rely on being a benign stationary bandit, and can simply ignore the people’s demands while also not building or providing any public goods, using the resource revenue to coerce and coopt supporters to stay in power. The political struggle within the country then becomes one in which the struggle is over the resources, allowing whoever is in control of the resource is buy up or coerce support for power. In this way, a government does not need to tax its citizens and a government that cannot or will not tax its citizens is a very weak state, and when revenue streams are cut off due to volatile global commodity prices, this weak state can fall very quickly.

            In the end, there is a need for policy reconsideration for most of Africa’s governments. Unfortunately, the incentives facing many leaders lead to policies that do not favor long-term economic growth and make it hard for the country to move forward along with the rest of the world in an age of vast wealth increases. With billions of people rising up from poverty elsewhere in the world, weak states and poor governance is holding Africa back from following in East Asia’s footsteps and becoming another economic growth miracle. The potential is there for many countries in Africa to join the rest of the world in the ladder to economic success. Steps need to be taken to strengthen the governing structures, making leaders accountable to the people, and providing the right incentives for leaders to provide for its citizens and lay the foundation to future years of economic growth.

Reference Page

Bueno de Mesquita, B., & Smith, A. (2011). The dictator's handbook: Why bad behavior is almost always good politics. New York: Public Affairs.

Collier, P. (2009). The bottom billion, why the poorest countries are failing and what can be done about it. New York: Oxford University Press, USA.

Packer Notes. The Bottom Billion. 2013 (a)

Sheldon, B. D. (0). Retrieved from http://www.foreignpolicy.com/failed_states_index_2012_interactive 

Government Policy & Economic Development

- A paper I wrote for a class "Political Processes in Underdeveloped Systems" : Fall 2013

Government Policy & Economic Development  

            Since the Industrial Revolution, countries have seen industrialization as a goal for the state’s economic prosperity as well as safety. Britain was the first to industrialize in the western world, giving them first mover advantage in some industries. This led the rest of the world to contemplate ways to catch up to British industrial power. The likes of Alexander Hamilton advocated for state led industrialization, what has now transformed into neo-mercantilist policy, while liberal advocates for development stem from the likes of Adam Smith. Today, there is still contention as to what works and what does not. Throughout the later half of the 20^th century there was a split between the two groups calling for state led development, leading many Latin American countries down the path of ISI strategies to try to develop. By contrast, the East Asian countries adopted an outward looking, export-oriented approach. In this essay I will first examine the debate between liberal and state-led development arguments, looking into which policies have had more success and reasons why. Next, I will examine both ISI and EOI policy and see how they differed and to what environment spawned them. Lastly, I will examine whether the results, or relative success, of EOI policies in East Asia support liberal ideology over neo-mercantilist in regard to industrialization for the developing world.

            The role of government with regard to economic development is a concerning issue for most of the developing world. Some argue that state-led development is the key to industrializing and increasing economic capacity while others advocate liberal, hands off markets that will attract foreign investment, thus leading to development and growth. The proponents of state-led development have followed a sort of dependency thesis, put forward by the likes of Andre Frank who argued; “the metropolis state (developed world) exploited and controlled the satellite (LDC’s) by extracting economic surplus and wealth from the latter” (Kukreja 2001). The core of this dependency view is that the LDC’s economies have a comparative advantage in primary products and raw materials relative to the developed countries that manufacture goods. Therefore, there is a system of trade in place in which developed countries and their transnational corporations move into LDC’s to purchase the raw materials, exporting them back to the industrialized countries for use in manufacturing. In essence, the advanced countries have first mover advantage in industrialization and therefore are able to undersell any other value-added good producers from the LDCs, forming an international division of labor. This was a problem, according to some like Raul Prebisch because, “the prices of the LDCs products tended to decline over time relative to the prices of the industrialized countries products… countries specializing in producing raw materials and farm products were at a fundamental disadvantage” (Frieden, Lake & Shultz 2009). This is permissible because the industrialized countries and the multinational corporations have large resources and can move capital across relatively freely. Furthermore, theses multinational corporations are able to circumvent any restrictive regulatory measures that the developing world may have in place and transfer profit out of the LDCs back to the developed world. These views, coupled with the breakout of the two world wars and the Great Depression, gave rise to ISI policies, stressing, “constraints on adverse external influences in order to promote self-sufficiency and internal development” (Kukreja 2001). Lastly, many dependency proponents believe the institutional system is stacked against the LDC, because the IMF and World Bank are all controlled and operated by the developed world. This is directly contrasted with a more liberal consensus that emphasizes the importance of domestic economic policies of the LDCs as the piece to the development puzzle. According to liberals, the greatest inhibitor to growth for LDCs is their own policies that distort the price mechanism and scare away foreign capital. Therefore, encouraging privatization, policies friendly to foreign capital, and easing regulations for the private sector were all seen as critical to development. That way, countries would be able to export what they have a comparative advantage in and integrate into the global economy. In the end, the argument for state-led development split into two separate strategies, on one hand ISI, an inward strategy adopted by many Latin American countries, while the Export Oriented Industrialization (EOI) was adopted largely by countries in East Asia.

            Import-Substitution strategy was put to practice in Latin America throughout the mid 20^th century up until around the 1980s. The main goal of ISI was to break the reliance of raw materials and build up a manufacturing base, stemming from the various dependency arguments from above. The state was to take an active role in economic development and industrial policy. This was done through government policy that created trade barriers for domestic manufacturers, giving out tax credits and cheap loans to industry, as well as government provision of basic industrial services (Packer Lecture 2013(a)). The policies were intended to increase industrial capacity, which would enable the country to end its dependence on foreign imports. To achieve this require large-scale government intervention that specifically targeted certain industries to give subsidies and tax credits to, while simultaneously offering protection from the outside market through trade barriers. Fortunately for the manufacturers, the domestic market for its good already existed and they did not have to go abroad to sell products. Unfortunately however, this stifled any incentive for a company to increase productivity or efficiency due to lack of competition. Domestically, these policies appealed to the urban working class, which saw a rise in employment due to increased industrial capacity. However, agrarian interests opposed these policies because they benefited from exporting agriculture. As Latin American countries began to subsidize industry, they also subsidized citizens living in the cities who worked in the factories, These subsidies exploited the agrarian interests by trying to depress food prices with an artificially high currency and other means. Basically, the development strategy called for “blocking the import of industrial goods so that domestic demand would stimulate domestic production” (Brawley 1998). In the end, a lack of state autonomy, allowing for interest groups to pressure government for favorable policy coupled with the rise in dependency arguments gave rise to ISI policies in Latin America that favored an inward looking development strategy.

            East Asian economic success is often seen as the accomplishment of Export Oriented Industrialization policies that propelled countries to industrialize and move away from raw material. Unlike ISI policies, the East Asian model subsidized and provided cheap credit to industries that were able to export their products abroad. If an industry could not show that it could compete in the global market, then it would stop receiving aid from the state. This provided an incentive for firms to create world-class goods that foreign markets would want to import; otherwise they would be cut off of government support. So, “raw material imports necessary for manufacturing industry were not suppressed, and selected domestic manufacturing industries were targeted with fiscal incentives to stimulate the level of exports” (Kukreja 2001). Just manufacturing for the domestic market was not enough. The goal was to move up in the commodity chain, increasing production of high quality, higher markup goods and away from the production of low value-added trinkets (Packer Lecture 2013(b)). This was further pushed through currency devaluation that made exports appear cheaper to foreign consumers, and therefore increased competitiveness (Brawley 1998). Also, the need for human capital, to provide workers for higher tech industries and higher skilled jobs that would be necessary to move up the commodity chain, the state heavily invested in education for the populace. Government initiatives in the reducing illiteracy coupled with access to job training programs were evident in high rates of government investment in creating an educated and skilled workforce (Kukreja 2001). This was essential to creating a more productive workforce that would go hand in hand with the goal of having competitive exports on the global market. Lastly, the fact that the state was largely insulated from interest group pressures and able to work in a technocratic manner enabled centralized decisions about the economy. This was beneficial because it allowed the creation of institutions such as the Economic Planning Board in South Korea, which was, “given authority over the setting of tariffs, administering direct subsidies to industries, and setting economic targets (Brawley 1998). This board had power over government budgets and was able to carry out its duties without referring to the legislative branch, keeping in insulated from interest group pressures. Basically, economic policy makers were highly centralized and allowed to function without consent of legislative authorities who might have contrary interests due to interest group and constituent pressure, allowing for EOI policies to take place and promoted stability in the policies, creating a suitable economic environment.

            The Washington Consensus was a set of policy recommendations advocated by developed countries in the 1980s and early 90s for developing countries. Theses policies included, trade liberalization that meant the removal of barriers to imports and exports, privatization of many government enterprises, fiscal and monetary policy that avoided large deficits and high inflation, as well as an openness to foreign investment an international capital flows (Frieden, Lake & Shultz 2009). These policy suggestions followed the liberal approach to development, meaning the need for capital formation inside a country is essential for economic growth. By integrating into the world economy, countries scarce in capital will get capital flows from areas of abundant capital, as long as there are solid economic policies in place that allow for the inflow of capital. Obviously, both EOI and ISI polies headed for a more state oriented approach, albeit they have some differences in the way the state operates to propel growth. However, both strategies see the need for an active state role to increase economic development. Liberals argue that government protection of domestic markets, showcased in both state led policies can have negative effects such as, harming exports and domestic agriculture, inducing rent seeking, and removing pressure on domestic producers to lower costs to international levels (Wade 1993). However, EOI policies were successful even with some degree of protection, quite possibly by accelerating the shift of comparative advantage into higher-value added activities in East Asia. Coupled with other government subsidies and programs that promoted exports, many East Asian countries were able to use the state to promote industrialization, contrary to neo-liberal economic decree. In the end, South Korean share of manufacturing as percentage of GDP increased from 14% in 1960, to 30% by 1983, and is around half in the present (Brawley 1998). This shows how EOI policies were largely successful, although East Asian countries did pay attention to some neo-liberal policy by creating economic environments friendly to growth.

            In the end, state-led development can play a crucial role in economic development and growth for LDCs. Although ISI was largely ill advised and no longer undertaken after the 1980s, EOI picked up where ISI left off and propelled East Asian economies into the global market. Today, companies like Samsung and Hyundai are a global force and produce quality products that are exported from South Korea throughout the world. Before the state started to pursue EOI policies, it might have been unthinkable that in less than 40 years a largely rural, less developed country could become a thriving, developed economy with a large manufacturing base and a GDP per capita close behind the developed economies of the world. Obviously, contrary to neo-liberal philosophy, there can be a role for the state in economic development and it can turn out to be quite a crucial role as is evidenced by East Asian economic success in the last half of the 20^th century into the 21^st century. 

References

Brawley, Mark R. "South Korea Opts for Export-Oriented Industrialization," in Turning Points: Decisions Shaping the Evolution of the International Political Economy. Ontario, Canada: Broadview Press, 1998, pp. 279-293.  

Frieden, J., Lake, D., & Shultz, K. (2009). World politics: Interests, interactions, Institutions. New York, NY: W.W. Norton & Company.

Kukreja, Sunil. "The Two Faces of Development," in Introduction to International Political Economy, 2nd edition, edited by David Balaam and Michael Veseth. Upper Saddle River, NJ: Prentice Hall, 2001, pp. 320-345.

Packer Lecture(a). 22 January, 2013

Packer Lecture(b). 24 January 2013

Wade, Robert. “The Visible Hand: The State and East Asia’s Economic Growth,” in Current History, Research Library, 1993, pp. 431-441.