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09/17/2018

Comments

JacobAFlood

In "Institutional Barriers and World Income Disparities", Wang, Wong, and Yip lay out a clear explanation as to why certain countries have grown faster than others. They go through the importance of total factor productivities (TFPs) and how the countries that have stronger TFPs have more economic growth. While these are highly influential, as they can illustrate how a country is doing in growth across an entire economy, it is more important to focus on the results from the article about institutional barriers. They found that institutional barriers corresponded with economic growth, which is a conclusion that agrees with Sachs' point about the importance of good governance. Sachs argued that the Sustainable Development Goals require smart governance to make them happen. This focus on government policy relates to Sen's argument that freedom is the key to more freedom. The problems with institutional barriers were cited as unnecessary protectionism, government misallocation, corruption, and financial stability.

I am unsurprised that these are the issues that seemed to matter the most to economic growth. Unnecessary protectionism is a violation of the freedom to trade and barter, something Sen goes into detail on. On the other hand, government misallocation, corruption, and financial stability are all issues that deal with the government not treating the people right. In high freedom societies, specifically democracies, the government is required to listen to the needs of the people. When it does, then the economy is encouraged to grow even more. For these reasons, it is easy to see that Sen and Wang, Wong, and Yip wrote complementary articles that help inform us more fully on policy going forward.

Clair Spotts

I wish this work had looked at all developing nations. While the writers did define and support a clear pattern of fast-growing and laggard economies, with consist reasons for the demonstrated outcomes, I would have liked additional countries to be included. Because there is only a set number of developing countries, it’s possible, and important, to include more than 20, especially when arguing that certain circumstances result in specific outcomes. The countries chosen, with the exception of Greece, were all from similar geographical areas. I would have liked to see a Central American county included, as well as a Northern African/Middle Eastern country.

In addition, because this paper looked at development from a purely economical standpoint, it overlooked any potential advances the laggard countries saw, or the fast-growing countries missed, in their social and political development overtime. As we’ve discussed in class, development cannot be viewed from one lens if one wishes to have a full understanding of the improvement (or lack there of) of citizens’ lives over time. It would be beneficial to look for sources covering any social/political development for the countries in this paper to view any progress made.

Maddie Geno

The evidence presented in Wang et al’s article helps to back up many of the claims Sen made about the importance of free markets and the role of institutions in providing a fair and level playing field. Almost all of the trapped and lagging countries cited in the paper lacked the strong government structure needed to make the leap from an agriculture dependent economy to an industrialized economy actively importing and exporting on the global market. Many of the lagging economies in Africa have failed to reach a certain level of development to their dependence on a few raw commodities. For example, Comoros is highly dependent on only three cash crops, Cote d’Ivoire on cocoa, and Kenya on coffee and tea. The lack of diversity within these economies creates a high level of risk and hinders these economies from competing with other developed countries. Those countries that have experienced a positive change in their growth made a transition towards free markets and export oriented strategies. One of the most striking examples of the success of this strategy was Chile, who was victim to high levels of inflation and large budget deficits, until they pursued free-market reform. Ultimately both Wang and Sen express the importance of free markets, as they open up the door to innovation and create a competitive environment. Furthermore, movement away from agricultural economies and towards free markets would help to give people the sense of individualism and autonomy that Sen claimed as integral to freedom.

Michael Adams

Throughout this paper Wang et al identify institutional barriers as playing a critical role in development, or lack there of. It makes intuitive sense that countries which promote strong exports and economic diversification will see stronger growth than those which do not. Going off of that, in reading this paper I was interested in the discussion of foreign direct investment (FDI) and its impact on development. In econometrics last winter I studied the relationship between FDI and economic growth using the Latin American sovereign debt crisis as a case study. While our project affirmed the widely held view, repeated by Wang et al, that FDI promotes growth, I was most interested in the wide body of literature addressing the impact of government policies on FDI. In this paper Wang et al discuss in some detail how civil war and unrest in Uganda spooked foreign investors and decreased FDI. While not as obvious, the government policies pursued by several Latin American countries that contributed to the sovereign debt crisis in the 1980s-1990s had a similar impact on FDI. Simply put, bad public policy, or institutional barriers, inhibit FDI and by extension development because they tend to scare off investors. While Wang et al rightly identify FDI incentives as a development-enhancing factor, I would have liked to see more information about how this played out in the so-called Asian Tiger countries as part of their discussion of each.

Suha Abdulmalek

I enjoyed reading this paper, it was very informative and detailed. At first, I wasn’t able to draw conclusions from the cross-country quantitative analysis both for the fast growing economies and development laggards countries. However, the fourth section provided an in-depth analysis which made me comprehend the reasons behind the wide income disparities.
It was interesting to see the different approaches the fast-growing economies countries adopted in order to push their economy forward. Mainly investing in high-tech industries and becoming major exporters. What I found very surprising is the shift that Honk- Kong went through. A sudden change from manufacturing-based economy into a service-based economy, yet the financial growth that led was immense. However, I was not able to understand how Singapore had the capacity to adopt a high wage policy and simply shift from labor-intensive to capital-intensive. On the other hand, when I started reading the development laggards section, it was shown clearly the reasons behind the wide income disparities between the countries provided. I found the analysis and reasons provided- the unnecessary protection, government misallocation, corruption, and financial instability, very convincing. The case with Argentina for example, reminded me with the situation that happened in Egypt a couple of years ago. The Egyptian pound was pegged for a long period of time, and many explained that this strategy was adopted by the previous regime as a tool to maintain its authority. This hurt their economy badly as they lost billions in their foreign exchange reserves, and the volatile exchange rates weren’t inviting for foreign investments. Although the pound floatation in 2016 was an unpleasant shock to the vast majority of Egyptians, the economy now is going through slow recovery. I find this example fits with the other development laggard countries as it shows how government misallocation, financial instability, and most importantly corruption can lead to a slow growing economy or not growing at all.

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