Ideas not Institutions, part 1

Prof. Clark gave an interview the other day at the Intrepid Liberal Journal blog. Here’s Clark discussing what national and international governments should (and shouldn’t) do to help those places stuck in Malthusian Traps today:

ILJ: Fair enough. Professor Clark you’ve been very generous with your time. A final question if I may sir. Assuming all your conclusions about the importance of culture in facilitating the industrial revolution are correct, what lessons can we draw from history as we try to influence economic growth in the underdeveloped world in the 21st century?

Clark: Well, the lesson is unfortunately a little pessimistic. But I think one thing that is important is that for fifty years institutions like the World Bank have been applying the same kind of medicine. And it’s like pre-industrial doctors, you try bloodletting, and when it doesn’t work, you conclude let’s do more bloodletting.

ILJ: (Laughs)

Clark: And there is this emphasis now, it seems, a very strong emphasis, on achieving good government in a bunch of African societies which really have a hard time maintaining Western style governments. But yet when you look you see someone like China growing very rapidly with a very corrupt government, terrible social institutions, and the rule of law really evaded on a massive scale (laughs).

ILJ: (Laughs)

Clark: And so when you see this you think maybe to focus all your energies on institutions is not the way to go. What the very clear problem, say, within these African societies, is that even inside production enterprises it’s very hard to get people to cooperate in production in a way that makes workers have high value. And the shocking thing that’s occurred recently is that in Zambia and Malawi, where Chinese entrepreneurs have moved into these very poor African countries, wages are much lower now then they are in most of China. But they’ve actually been importing Chinese workers in factories in sub-Saharan Africa.

ILJ: That’s ironic.

Clark: And encountering a lot of local opposition. The puzzle then is it seems just very hard to get people to cooperate effectively in production in these societies. I think that says this is an area where we really must examine what is going on here. One interesting idea is that the nature of modern technology is very demanding in terms of how careful workers have to be, how exactly they have to follow rules. So one thing to think of is there any way to develop other technologies more forgiving of the cultural histories of these societies? Another thing to look at is if we expose workers more to the kind of Western high income economic life and send them back would that actually help in changing workers attitudes and changing the economic life of those societies? But I don’t have any simple recipe for economic growth, and anyone who does is someone you should avoid.

ILJ: (Laughs)

Clark: I do think that we’re looking in the wrong place, and have been systematically. And it’s the ideology of economics that pushes us there but it’s very clear that it is the wrong place. So it’s at least worth considering, given the true constraints, what can we do? How can we operate? What are the processes we can set in place? And if we are going to solve the problem of poverty in sub-Saharan Africa, the solution is going to come in a very different form then the followers of Adam Smith are going to accept.

7 thoughts on “Ideas not Institutions, part 1”

  1. “One interesting idea is that the nature of modern technology is very demanding in terms of how careful workers have to be, how exactly they have to follow rules. So one thing to think of is there any way to develop other technologies more forgiving of the cultural histories of these societies?”

    This is a really interesting statement. Has he ever written anything that explores this concept in more depth?

  2. His most cited paper — academic speak for his best paper — is comparing cotton mills in Britain and India around the turn of the 20th century. There was a substantial difference in productivity between the two even though they both used the same technology, the same managers, the same training, etc, etc. He pretty convincingly shows that all the factors you’d expect to be driving this difference in productivity just weren’t there. There is something about British workers that made them more productive.

    His statement above follows from the conjecture that the difference is culture and the observation that all of the cotton mill technologies were developed in Britain.

    The paper: “Why Isn’t the Whole World Developed? Lessons from the Cotton Mills,” Journal of Economic History, 47 (March 1987)

  3. That’s the sense I got from that statement. I haven’t read that paper, but I suppose he’d include something about the management procedures and techniques in addition to the raw machinery. It’s not just the loom, it’s also the foreman, his assistants, the factory hours, the bookkeeping, etc.

    When I worked at that hat factory, I had to help write a few production orders for Chinese factories. We had to be extremely specific about every single production detail possible, because the managers overseas would follow the instructions exactly to the letter. At best, the slightest ambiguity would result in a rejected order. At worst, it would result in a ruined production run – their procedures literally have them working like robots.

  4. Yeah, Clark seems to think he controlled for management and procedures in his analysis.

    The thing with your experience is that the Chinese factories you’re sending orders too are able to take those orders. Clark’s point is that at some level and in some locations (in space or time) the laborers themselves just couldn’t do the work. Their culture hadn’t programmed ’em for it. In other words, acting like a robot isn’t what hunter/gatherers are good at.

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