So Much of the World Economy Has Been Going in Reverse

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, I think for all of our careers, probably all of our lives, it feels like there has been this story of developing emerging markets, getting better, emerging, maybe emerging markets, becoming rich. Just this general view that, yeah, you get these hiccups and de-globalization, whatever, but the arrows are all up.

Tracy Alloway (0:36)

In general, it's a steady line that goes up over the long-term.

Joe Weisenthal (0:41)

What was it the Victor Schvett's question at a recent trivia thing about, what did they call them in the 60s? In the 80s, it was underdeveloped markets.

Tracy Alloway (0:53)

Then emerging.

Joe Weisenthal (0:54)

Then developing, and then emerging, and it's increasing optimism about all these places around the world. One day, capitalism and trade will be everywhere.

Tracy Alloway (1:02)

There is definitely this line that, okay, there might be problems and issues, but in general, life expectancy is going up. People are wealthier than they were before. Maybe people aren't starving as much as they were in the Middle Ages. There is this narrative of progress. Right.

Joe Weisenthal (1:21)

Progress, less disease, things like that, fewer famines and stuff. But maybe it's not the case. In the last several decades, a lot of people have come out of poverty globally, but a huge chunk of that is China specifically. Everyone knows there's been this extraordinary boom in China.

Then it seems like if you look ex-China, maybe it's not as good.

Tracy Alloway (1:42)

I can already tell this is going to be one of those really uplifting episodes when we start questioning the narrative of economic progress. But I think it does raise this interesting question, which is throughout much of history, there has been this one development model, which is usually you have a bunch of workers, you have a labor surplus, maybe they're willing to work for less than in more developed countries economically, and so you get this big manufacturing boom, and then hopefully that leads to more education, more resources, and then you transition into some services-oriented economy.

But I think we all agree that as we enter this new economic period, is that manufacturing model actually going to be viable?

Joe Weisenthal (2:26)

Right. How many countries can really do that, or are they going to be stuck in some tourism or cheap commodity exports that don't really move up the value chain? Is anyone thinking about alternative growth models if these countries can't find a way up to do this manufacturing path?

Tracy Alloway (2:46)

Absolutely.

Joe Weisenthal (2:47)

Anyway, we're going to be speaking about exactly this. We have two guests today. We're going to be speaking with Henry Williams, a student at Columbia University and David Oks, a journalist. They have a recent article that came out last year in the American Affairs Journal called The Long, Slow Death of Global Development.

And they basically make the case that you should be pessimistic about all that stuff and that all of these stories about what's working do not actually work. Henry and David, thank you so much for coming on the podcast.

Henry Williams (3:18)

Thanks for having us, Joe and Tracy. Long time, first time.

David Oks (3:21)

Yeah, pleasure to join.

Joe Weisenthal (3:22)

So why did you write this? I mean, it's a very long, detailed, pretty academic, well-cited piece, essentially laying out the case that much of what we assume about global progress is not, in fact, happening. So to start, why endeavor on this? What inspired you to write this?

Henry Williams (3:40)

I think the story that you just laid out has really dominated the 21st century so far.

It's a story that I think people sometimes derisively call the line go up story. Basically, when you look at just the quantitative measures, it is undoubtable that global poverty has been decreasing, that global growth has been pretty strong. And with the headwinds of globalization, the entrance of China into the world economy, and the demographic push of the last 30 years, there were a lot of reasons for optimism. And obviously there has been a lot of growth.

But what we think is that when you dig past just the quantitative numbers on the surface and look at the qualitative and structural factors in the world economy, both that which drove the growth and rise of China, but also you have to look at the next countries on the list. There's this idea of the birds in flight model. Basically, as countries develop, they pass lower value added services down the line to the next country. But that's not just an automatic process that requires a lot of economic, political, structural adaptation. And we think there are some very deep reasons why that hasn't been happening in the rest of the world.