• Sunday, Jun 11, 2023
  • Last Update : 06:03 pm

OP-ED: Demystifying the development ladder

  • Published at 10:06 pm March 14th, 2021
Upward development improvement increase

There are clear examples like Chad, Sudan and Somalia where economic prospects have looked precarious for a very long time

Why are some nations rich and others poor? What allows some nations to jump-start growth to only nosedive after a brief positive run? 

And what allows some nations to maintain economic progress over the long-run in the most stable form? 

Most importantly, what exact institutional and policy ecosystem is conducive for supporting long-run transformative development?  

These are, perhaps, some of the most fundamental questions in political economy -- and they constitute the developmental puzzles that are not fully understood by economists, social scientists and historians even today. 

After all, what has stopped the countries that are under-developed or trapped in the middle-income zone from successfully adopting the economic recipe that has helped some countries reach the zenith of economic status? 

There are clear examples like Chad, Sudan and Somalia where economic prospects have looked precarious for a very long time; and Argentina and South Africa, which had all the potential to sustain their economic lift-off but have failed to make that transition to high-income status.

But what has been the underlying cause of such economic under-performance of so many countries? 

Are the poor countries poor because they do not know the economic recipe for becoming rich? Or, are they poor because they are situated in adverse geographic locations that offer very little scope for connecting to the world market? 

It is also possible that some countries under-perform economically because the rich nations write the global economic rules, which limit the possibility of making a transformative economic change -- as the balance of power always favours the rich over the poor. 

Some, on the other hand, argue that the perpetual stagnation of the poor countries is a mere manifestation of the greed of its political elites who have designed their policies and institutions to favour rent-seeking and not entrepreneurship and innovation -- culminating in weak economic performances over time. 

Broadly speaking, it is likely that at each stage of history, some of these explanations were true for different under-performing nations under varying contexts. 

After all, can we understand Japan’s snail-paced economic progress under the Shogunate period between 1603 and 1868 without touching on the isolationist foreign policy of its rulers? 

Is it not fair to say that the decision to preserve its cultural purity over geographic exploration and trade made Japan miss out on the economic windfalls of colonialisation, then being enjoyed by its European counterparts?

Nor is it possible to understand the economic decline of India between the 18th and 20th centuries without studying the colonial mercantilist economic rules that stagnated Indian commerce and industries. 

India, for instance, witnessed growing colonisation by Britain after the Battle of Plassey on the 23rd of June, 1757. 

At that point in history, India accounted for almost one-quarter of the world’s GDP. 

Yet, by the end of British rule in 1947, its contribution to global GDP was reduced to less than 5 per cent.

Even today, one cannot understand the timid economic progress of countries like Cuba without understanding the grave economic implications of all the sanctions that they were subjected to after the Communist Revolution of 1959. 

On the other hand, not all the countries that remained economically stagnant can attribute their economic conditions to adverse international rules. 

There are plenty of examples where a country, rich in natural resources, such as the Democratic Republic of Congo (known as Zaire from 1971 to 1977), has performed very poorly due to a kleptocratic political establishment (especially under President Mobutu) perpetuated by extractive and ineffective economic and political institutions. 

Thus, as the Tolstoyian saying goes, “all happy family looks the same, but all unhappy family is unhappy in its own way” -- the conditions shaping the economic under-performance of countries have varied over both time and space. 

And if policymakers in the developing countries are genuinely interested to support the long-run developmental transformation, then they first need to harness a nuanced understanding of the forces that pull them back. 

As the preceding discussion underscores, these forces have varied over history and are likely to be different in the future as well -- changing for each country at different stages of development.  

It is also essential that the policymakers recognise that the developed countries are developed because they have created and harnessed the capacities for undertaking policies or institutional corrections that shorten the negative episodes of growth and lengthen the positive episodes of economic progress. 


They are also good at internalising the global opportunities and they restructure their domestic economy accordingly to fully cater to the global demand -- so that they can become a solid member of the global production process -- making a clear contribution in the value chain. 

This is what happened after the Meiji Restoration in Japan in 1868, which made the Japanese State patronise the industries that enjoyed a growing demand in the world economy such as silk and ships. 

It is also true for China after 1978 when the economic reforms that encouraged exports and general industrialisation received solid backing from the political establishment.

Consequently, the policymakers interested in developing the conditions that favour long-term development must undertake cautious experimentation with the policies and institutions that support the state’s capacity and promote an environment of competition and innovation, allowing a country to connect its production base to the global economy. 

Most pertinently, insights from economic history demand that we accept that the adverse forces that pull nations back economically across time and space have varied significantly -- which makes it critical that the policymakers develop a curious eye for exploring and identifying the adverse forces that could cool down the growth engine of the developing countries in the future. 

Only then can the developing countries sustain their gradual progress on the ladder of development. 


The author is a senior economist at the Policy Research Institute of Bangladesh