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Sunday, September 01, 2013

Rich Countries Can More Easily Get Richer

  I have previously argued against a meme common to politicians in slow growing advanced countries - that it is easier for undeveloped countries to grow because they are simply "playing catch up" using technology already invented.

    History does not show that. Indeed it shows that while being developed/undeveloped is not the most important factor in growth (economic freedom & sometimes energy resources are) the general trend is that the less developed countries grow slower.

   If this were not so the disparity between the wealthiest and poorest would not now be around 150:1. Around 1800 when the Industrial Revolution started even the richest countries were always close to literal starvation in bad harvest years so the poorest, however defined, could not have been much poorer.

   What factors allow advanced countries to grow faster?
*Well with Moore's Law and fast growth in other advanced countries our basic industries are clearly capable of very fast growth.
*On the other hand, while agricultural productivity is increasing everywhere it is not going to double easily so countries where agriculture are the basic industry are at an enormous disadvantage.
*Poor countries simply cannot take as large a fraction of their income out of keeping themselves alive and putting it into investment as rich ones can.
*Rich countries have good communications infrastructure, both transport and telecom, and good communication is an absolute necessity to any industry. Good communications are probably very important in promoting the rule of law without which no economy can grow.
*Rich countries can afford good education and an educated workforce is another necessity.

It is likely that some of this is being levelled by shipping containers, easy international transfer of investment money, and online education but that still leaves a major disparity.

Where rich countries are growing slower I think it is entirely when they decide to promote ecofascist Luddism - a self-indulgence which the literally and metaphorically hungry countries do not have time for.

   This lecture was brought on by this article on how robotics is already levelling the apparent advantage in cheap workers that China and the like have. This is how technological progress trumps previous advantages.
Much has been said over the last few years about the loss of American jobs to other countries. The fact is that China and India, as well as other cheap labor countries, have taken a good number of jobs.

Many of these jobs will likely never return. I wrote a 2006 article for the E-Commerce Times titled "Why Money Chases Cheap Labor -- The Outsourcing Phenomenon." The article attempted to explain why industry will probably always follow the path of least resistance when trying to lower the costs of manufacturing. The reason for this is that industry has to be competitive in order to remain viable.

 Is there a way, however, by which industry can stay competitive -- especially with its labor costs -- without outsourcing jobs? There is, and the answer is robotics. Smart Robots Robots have come a long way. There was a time when robots were mainly used in the auto industry..... Now, because of smart robots, factory personnel can focus on training the robots and supervising what they are doing. 

If you are an American manufacturer, why would you outsource the assembly of your product in order to garner the low labor costs of a foreign country, when you can purchase robots that can do the same job as good or better than foreign workers, and at a similar or lower price? It just wouldn't make sense.
I came to that article via Futurepundit which ran with the concept:

Wondering what are the ideal attributes of countries where to run huge robot factories?
  • very small human populations (so lower taxes needed to support them).
  • lots of natural resources.
  • low border exposure to teeming masses of poorer people.
  • exceptionally highly (primarily imported) skilled human workers.
  • governments which the capitalists can totally dominate.
I'm thinking big sovereign islands....

Think of Ireland. It seems a great place to put lots of totally automated factories. The Irish government has low corporate taxes. The population is small enough that a huge concentration of factories in Ireland would not need to be heavily taxed in order for the government to subsidize high living standards for most of the populace.

To which I commented & he replied

Manufacturing countries will have to have plentiful reliable electricity supplies which probably means nuclear plants (possibly shale). With robotics good enough to build a robot that can walk & chew gum, the far simpler problems of running robotic nuclear plants will be solved. However the real problem with nuclear is the Luddite scare. That may well exclude Ireland from becoming an industrial heartland.

I suggest that just as good rule of law may be more important than low taxes (taxes can only take a part of your money) a technologically progressive, low regulation, anti-Luddite culture may be even more important (I think such Luddism is already cutting western economies by 100% of their potential while taxes can only take 50%).

That could be Singapore, seasteding and Elysium (the latter only for high value/low weight items).
Neil Craig,
Iceland makes sense as a major manufacturing center for robotic factories. Cheap, reliable geothermal electricity. Small population. Sea port. Near export markets. I should have thought of this sooner.
and he has since done that article on Iceland
    Doing my British patriot bit I can suggest that Britain, while perhaps a bit on the large side, could fit very well into that format if we ever got a government not addicted to anti-tech Luddism. That is the defining question.

   I could also see Scotland doing it or indeed something like the Islay Community of Tomorrow I suggested some time ago. That would not necessarily be independent of the UK but would have a self selecting technologically progressive population, as would a seasted.

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