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Economic Development:

The broad issues

An unacceptably high proportion of the world's population still lives in grinding poverty and far too many are suffering from diseases, many of which could be prevented by access to clean water and sanitation.  The gap between the richest and the poorest is still widening.  The world spends more on seeking a cure for baldness than on the prevention and alleviation of AIDS in the world's poorest areas.

This need not be the case.  In the past fifty years, much of East Asia has escaped poverty, or well established on the way to doing so.  The main essential ingredients of sustained economic growth are have been identified by experience.  These include the rule of law and a reasonably honest government (all too rare), prudent macro-economic management and openness to the rest of the world. 

In recent decades, those economies which have been open to ideas, trade and investment from the rest of the world have outperformed, spectacularly, those which have sought to shelter themselves from competition from new ideas and new products.  The East Asian experience shows that it is possible to engage profitably in the international economy by specialising line with comparative advantage. 

In poor countries the most abundant resource is under-utilised labour, since there is seldom enough land, labour and technological capacity to engage them in ways which allow them to use their full productive potential.  Since most people of working age are under-employed and very poor, they find it attractive to seek employment at very low pay by industrial country standards.

If poor countries are able to attract domestic or foreign capital, they can be internationally competitive in lines of production which rely relatively intensively on labour, then they can boost their productivity and invest some of the resulting gains in better health, education and infrastructure.  This helps them to attract further investment, increasingly from domestic sources.  In more and more parts of East Asia, labour is no longer under-employed, but increasingly productive and progressively better paid.

As a result, their comparative advantage thus shifts to less labour-intensive products.   That leaves room for other economies, so far left behind, to become competitive in those products.  However, their opportunity to trade their way out of poverty depends on the rest of the world.  Unless the rich economies with higher paid labour are willing to face competition, it will not be possible for the billions still in deep poverty to follow East Asia's positive example.

Hence the world needs a rules based, open trading system.  In its absence, the interests of the currently small and vulnerable economies are likely to be ignored by the rich.  Since the 1950s, a relatively open and non-discriminatory international trading environment has been provided by the GATT, now succeeded by the World Trade Organisation (WTO).  This system is now under threat, partly due to lack of leadership (formerly supplied by a less self-centred United States) as well as from well meaning people who do not appreciate the crucial role of international trade as a means of escaping from poverty.

One of the most important aims of the Asia Pacific Economic Cooperation (APEC) process is to sustain and strengthen WTO-based trading system.  To do so, it will need to lead by example, by reducing impediments to trade and investment in the Asia Pacific region, without seeking to discriminate against the rest of the world, much of which is now poorer than APEC economies.

Andrew's experience

Andrew began to understand the issues of economic development from reading the work of Gunnar Myrdal and drawing on the wisdom of his teachers at the Australian National University (ANU).  Following a period of research on Papua New Guinea (PNG), he worked as an economist in senior positions for the Government of PNG just after it became independent in 1975.

He learned macro-economic management on the job, made friends with people in PNG, and began to understand the temptations to which leaders of nations are exposed.  In the absence of effective checks and balances, which in turn depend on a well-educated population, most leaders give in to these temptations.

After four exciting years, Andrew joined the World Bank, where he learned about other developing economies.  The experience including working in economies crippled by greed and corruption and some which were making a serious effort to recover from this damage.  He learned new-found respect for market forces, seeing that most efforts to restrict competition played into the hands of the rich and corrupt.

He returned to work for the Australian Government, first in domestic policy  areas then as the head of the Economic and Trade Development Division of the Department of Foreign Affairs and Trade.  He was lucky to be in this position when the long-discussed prospect of  cooperation among Asia Pacific economies finally appeared to be feasible.  He was heavily involved in the establishment of the APEC process in 1989 and its early development.

In 1990, Andrew took leave from the Government and never went back.   After three years as research economist and a year in community work he moved to Tasmania  where Jane obtained an interesting job after completing her Ph.D. in 1994.   His current work and lifestyle described elsewhere on this site took shape after that move.