Thoughts on Development in the Age of the Great Stagnation

If you believe Tyler Cowen’s thesis (I’m ambivalent), here’s an interesting result, one that we’re arguably seeing:

3. One class of vulnerable nations will be current exporters who rely on low wages to be competitive.  Automation in the wealthy nations will disrupt their business models.  The current Indian model of “doing most things internally” — which is by no means ideal — will be relied on increasingly.  Export-led surpluses will not be available to drive growth, as the wealthier nations become the export leaders by increasingly wide margins.  Given the rise of smart software and robots too, labor costs will not hold them back.

4. African nations and other poor nations, such as those in southeast Asia, also will not have the option of “last generation” export-led growth, pockets of resource wealth aside.  Many of these nations will specialize in lower middle class earners.  Free-riding upon global technologies will be important, as with cell phones today.  Many more technologies will spread in this fashion, with the aid of price discrimination.  We might see billionaires adopting particular regions or groups and transferring technologies to them at relatively low cost.  “Wealth without wealth generation” will describe many locales.

– See more at: http://marginalrevolution.com/#sthash.6Lw1IKmb.dpuf

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