Growth

What is driving the African growth miracle? Capitalism

I love it when you read an abstract that reaffirms everything you know, because I quite like an easy life. “What is driving the African Growth Miracle?” is a paper I have come across again recently, and generally confirms what we know about developing economies, or rather, the process by which they develop.

We show that much of Africa’s recent growth and poverty reduction can be traced to a substantive decline in the share of the labor force engaged in agriculture.”

The agricultural labourers losing their jobs is of course a good thing; it tells us that we don’t need to put as much labour into feeding ourselves, and therefore we can go off and be much more productive elsewhere.

Agriculture doesn’t need that much labour to feed us all, what with mechanisation and more efficient farming methods we can enjoy much more food with half the workforce. This is of course what the definition of increases in productivity means; more for less (and usually a better more).

As many other have argued, one of the great strengths of Capitalism is that it continually improves productivity and thus makes us all richer. Smith said it, Schumpeter said it and no one now disputes it because it is true. More from the paper;

This decline has been accompanied by a systematic increase in the productivity of the labor force, as it has moved from low productivity agriculture to higher productivity manufacturing and services.

Good. Agriculture is a low productivity sector, and industrialised jobs produce more. This not only makes people who live on the African continent richer, but us richer too, as we can trade higher value items, and enjoy the benefits of those trades too. Here is to more exploitation of Africa!

 

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Lifting Iranian Sanctions was a good thing

The great Hitchens railed against the “mad mullahs” and warned of the consequences of the Iranian Government getting ahold of  weapons of mass destruction. Since I am not a great fan of war, it is probably a good thing that a deal with Iran was reached over their nuclear programme, principally, them not developing nuclear weapons for the foreseeable future.

As a part of this deal, the sanctions that were in place against Iran have been lifted. This of course has been a good thing for for us, and the Iranians too. So a new paper from the World Bank says;”Iran benefits the most, with average per capita welfare gains ranging from close to 3 percent… to 6.5%” The crucial point here being the “…”

Of course these benefits for Iran are dependent on them not being stupid, in both senses; don’t betray the treaty, and don’t go against the economic sense. Sensible economic reforms, enabling a “strong supply response” would include lower marginal tax rates and further capital investment, and will help the Iranians get the economic benefits that the deal allows.

This could be great for Iran if they are able to export oil to the western world, which they now can, and even better with a high oil price. However, currently we don’t have a high oil price, and therefore it is the western world that benefits doubly; we don’t have to worry about a nuclear armed Iran, and we are enjoying cheaper and more plentiful oil.

So, everyone wins right? Well, yes. Principally because of the “…” (do read the paper) which is really the conditions we find ourselves in. In this often maddening world, this is something to be celebrated.