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OP-ED: Catching up on growth

  • Published at 12:02 pm September 27th, 2020

Can Bangladesh grow faster by imitating richer countries?

Ekram Kabir in these pages does have a point. Why send 1,000 officials from the school system to other countries in order to learn how to cook and distribute khichuri? Surely, this is something that Bangladeshis already know how to do?  

Or if it's just the people who work for the government who don't know how to do it, why not send them to work with Ek Takay Ahar for a few weeks? A charity that cooks and distributes food for the poor might well have something useful to teach the employees of the state. 

Kabir's point being that this does look like what the Americans call a boondoggle. An expensive and worthless piece of government work. While it might also be rather enjoyable for those bureaucrats of course -- the same reason that conferences are held in Las Vegas and not rural Alaska, and the fun of the trip is a major part of the point. 

There will no doubt be a certain amount of truth to this. However, we also need to look at the other side of this, which is that this is how economic growth actually happens. Most especially, it's how it happens from where Bangladesh is today. 

We all tend to think that a new steelworks or a power plant is economic growth which, of course, it is. But that's just a visible signal of such growth, it's not the growth itself. Doing something -- anything -- more efficiently is economic growth. The rise in efficiency is a rise in productivity and productivity, as the Nobel Laureate Paul Krugman has been known to say, is not everything, but in the long run, it's pretty much everything.

If we raise productivity in doing something -- whether it's the efficiency with which we use labour, rice, lentils, or how we feed schoolchildren -- it means that we can then do more of that thing for the same amount of resources. We have more, we're richer, growth has taken place. 

We tend to think that being richer is better so yes, we do want to be more efficient and raise productivity. Further, we want to do this with everything. So, while the provision of school lunches might seem like a small thing, it is still that growth that we're trying to gain.  

The economy as a whole is made up of millions of such small things and we desire to increase the productivity with which we do all of them. 

That's a general principle that every economy should be following. To be more specific about Bangladesh, we all recognize that the country is poorer than some others. Yes, a very good growth rate for a couple of decades now, vastly better than it was before. Now, in fact, substantially richer than many countries even if still poorer than others. What this means is that Bangladesh is still inefficient, compared to those richer, at doing some to many things within the economy. 

This provides an opportunity. For the very richest places on the planet -- say, to be uncontroversial, Switzerland -- there is no one they can look to and copy. Any increase in wealth, or productivity, has to be worked out directly. People must experiment and find out what course of action is actually more productive, this being entirely new knowledge that has to be discovered. 

For places like Bangladesh, which are in the middle of the order, there's a different method possible -- copying. There are those places which are richer. So, what is required is looking at what they're doing and then copying that because they've already worked out those new, more productive, ways of doing things. 

More formally, this is known as “catch up growth” and is known to be rather easier than that growth at the technological frontier. Which is why, when a poorer country adopts just the bare minimum of a decent economic structure, growth is faster than it is in rich countries.  

This is also why poorer countries should grow faster than richer countries -- because there is already so much known about how to get richer that just needs to be copied. 

So, sending people to other countries in order to learn how to do things better is not merely a boondoggle. Or, perhaps more accurately, it does not have to be. For observing and then copying how richer places do the thing is exactly how to make ourselves richer. 

The idea that 1,000 need to be sent concerning school lunches is perhaps excessive -- perhaps sending a handful who come back and tell the rest might be a better use of the limited resources in the education budget. The idea of copying foreigners does work though, and has a lot to recommend it. 

Tim Worstall is a Senior Fellow at the Adam Smith Institute in London.

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