22 July 2009

Great ideas

A couple of interesting ideas I came across last night - Alan Beattie, the FT's trade editor was talking on Development Drums, and one point in particular stood out. He puts the blame for the thousand year stagnation of the Middle East not with Islam but with the Mongol invasions, which instituted a dictatorial top-down style of leadership, a style which subsequent Islamic leaders stuck to and twisted Islam to fit. Beattie argues that the test of this hypothesis would be a Christian country also invaded by the Mongols, and that this country exists - Russia. I'm not quite sure that this standard of evidence would get you into a top economics journal, but it's an intriguing idea.

Secondly, Paul Romer, one of the inventors of modern growth theory, argues in this lecture (via the Economic Principals Blog) that the answer to China's thousand year long stagnation was institutional experimentation. Specifically, he argues that it was Hong Kong, with its cutting edge (British) institutions and governance, that motivated China to experiment with its own "special economic zones" along the coast, successes which led to further liberalisation, and ultimately the greatest ever anti-poverty programme.

Which finally leads me to Romer's proposal, which is that just like in competitive markets, competition between countries about rules and institutions needs to allow for new entry to be truly effective. We need to be able to experiment with new institutional forms, including the idea of foreign countries or groups of countries running a city-state in a poor country.

Part of this argument involves a discussion of space, which is where do we put all of these new urban city-states, when we can expect 5-8 billion people to be moving to cities over the medium-long term. He then shows a slide of Africa at night - empty.

Which is almost the same as what Abhijeet has been saying for months, the solution to all of Southern Sudan/Africa's problems is importing Indians. Voila!

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