Economic development does not necessarily have to be defined within the constraints of national borders or countries. To save our world from crisis to crisis, from famine, war, and political conflicts, development has to be redefined in the wider context of world development inclusive of world resources – material, people, land, technology and entrepreneurship. Unless this view is accepted as the basis for action, the world will continue on its downtrend because its basis or root is inappropriate or incompatible with sustainable development from a global human perspective.
Too many factors involved in economic development as it is presently defined are externally determined – external to the country whose development is being studied. Domestic policy efforts could at best be useful to the extent internal market distortions are corrected to allow benefits to expand within the system, which of course limits the growth of national output up to the size of the internal market. Beyond this, a global perspective and strategy is essential. That’s why import-substitution can power growth for a while, and growth henceforth, becomes dependent on externally determined factors. And in the global arena, certainly purely economic issues often are subservient to those linked to socio-political factors. Often, this explains why a country after doing all it can to put its domestic house in order, experiences a burst of economic growth, then plateaus or stagnates for reasons linked more to historical, political and social issues than to the apparent economic issues advanced as explanatory variables. This is true even with the advent of regional trading arrangements such as AFTA, APEC, and WTO.
The resolution of issues on economic development and/or human development (with emphasis on the quality of life) for individual countries or nations may be better sought from a wider perspective using an economic paradigm that challenges our oldest set of beliefs regarding the ultimate human motivator for economic enterprise and human well-being. This is not to say that the efforts of helping institutions like the World Bank, IFC, and USAID, among others, are not important. Up to a point, countries are helped to correct self-inflicted problems like price and market distortions and other social and political problems that may or may not be historical in origin or deliberate. Beyond this are problems that are globally and externally determined that are just too much and too well entrenched in the internal system for any one nation to resolve on its own.
I think of a new economic paradigm which sets out to maximize production given the world’s supply of land, labor, capital, technology, and entrepreneurship, and allowing unhindered production specialization to take place wherever it is most efficient to do so. For example, rice, corn, wheat and agricultural products are allowed to grow where the production function is allowed to shift to the outermost technology frontier without tariffs, quantitative restrictions, foreign exchange controls, and other administrative regulations serving price-fixing objectives of vested interests whether corporate or government. The same is true for production of clothing, electronics, and other goods. Specialization in production according to global comparative costs inclusive of transport and market distribution costs is the key. The resulting global trade and exchange payment system, while enormous because of the greatly expanded levels of production to be made available, will parallel the flow of goods and commodities, i.e. countries that produce and sell more will receive more payments and have more income.
The other blade to this paradigm is the notion of distribution of output consistent with a more equitable consumption levels worldwide. Conceivably, with the resulting monetary income and payments favoring countries which produce and sell more, world income hence purchasing power or consumption levels, may be distributed more unevenly among nations. Redistribution of income to effect a redistribution of purchasing power among nations is a challenge that must be accepted as leading to the solution to many if not most of the world’s problems today. The mechanism of this system needs to be fleshed out carefully on the level of world groupings. A truly representative and impartial United Nations would be a logical first choice to start the ball towards this end. The mechanism may be based on a monetary system of compensation that evens out the greatly skewed income distribution from world trade specialization, or it may be a more direct commodities and goods distribution program undertaken on a global scale. But whether the UN, as it is today, with some help possibly from the IMF would be equal to the task is another matter. Only time will tell when the world will be ready to depart from an economic system so deeply conditioned and entrenched in Adam Smith’s principle that equates the pursuit of self-interest as the beginning of economic wisdom.
Short of the dream of a Utopian economic development paradigm briefly outlined above, there are problems to be faced in moving from the domestic to the global resolution of economic development problems for any country. In the neoclassical system which describes our present, most developing countries have a lot of work ahead just putting their economic houses in order to really optimize the benefits to be gained in a market-system economy, internally as well as globally. The economics literature does not lack volumes on the definition, measurement, and correction of market distortions, intended or not, apparent or disguised, etc. in terms of prices, tariffs, quantitative restrictions, exchange controls and other politically introduced measures of policy. The bulk of the effort consists of the political will to find out the extent of the problems attendant to these market distortions, the decision to resolve these problems, and the determination to implement corrective actions.
Norma Tan's Blog 