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2019-05-24Macro `n Cheese

Colonial Revival

This week, Roger revisits and mass-produces the graph that's been getting the most attention from a recent post. It's not one of his own, but Branko Milanovic’s ‘elephant graph’, which Roger now expands to a host of former colonies. Well, imitation is the highest form of flattery.

In this week’s post, I wanted to put the emhasis on a graph that Branko Milanovic posted some time ago, and that I used in a recent overview of China. Milanovich does have a knack for suggestive graphs, and this one is no exception.

 

 

In the original graph, it was only a couple of telling success stories (China, Indonesia, India), but the message is perhaps even clearer looking at it across a large number of (previous) colonies. Studying the median adds another layer of information which highlights the travails of the colonizers during the world wars and depression (a period of relatively un-free trade), rather than any strong developments in poor and emerging economies.

Indeed, while there is an odd success or other (like Japan and Taiwan), most countries have experienced, not decades, but centuries of declining relative fortunes (or sucked dry by its colonizers, if you prefer) until free trade freed them from their shackles. Asia, in particular, appears to have been able to capitalize on this:

 

 

But in other regions, like the Middle East and Africa, there are scant signs of economies returning to their former glory. Egypt and Jordan are the two major exceptions, while most other “improvements” seem to be brought on by higher oil prices or the end of war (not necessarily outright peace, mind you).

 

 

Turning to the Americas makes for an even more somber read. During the initial phases of the Doha round (and the signing of NAFTA in 1994, for Mexico), there were some tentative signs of an improving outlook for many of the continents’ larger economies. Unfortunately, over the past couple of years, the same countries have again – and sadly – seemed to revert to their old sins. Barring, arguably, Chile and Peru, there is very little movement in the right direction for these immensely resource-rich countries.

 

 

Alas, it seems as if free-trade is not enough for emerging economies to grow and catch up. Peace and strong democratic institutions are also necessary (but not sufficient) conditions. Or is it, perhaps, something more fundamental – people – that eventually make countries grow? Safe, healthy, fed, and educated people. Maybe that’s the secret mojo?

But, boil it all down to one thing, and what you (and me, and experts like Brankovich) are almost always left with is a single and almost heart-breakingly human trait:

 

Trust.

 

 

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