Muddling Around

Why do some countries grow faster than others? Charles Kindleberger, intellectually as agile as ever, tries to answer the question in this book "" and comes up against a blankish wall. At the end of it, the reader is left vastly better informed about the historical experience of several countries, but not really much wiser as to what causes those periods of astonishingly rapid growth and, equally, decline.

The most that Kindleberger is willing to venture is the statement that a country's economic vitality goes through a cycle, like that of a human individual... as a rule, it starts slowly, picks up speed, rockets along for a period and ultimately slows down.

 

He describes this process as the S-curve, also known as the Gompertz curve or logistic curve. What you get, if you go along with Kindleberger, is a continuum of S-shaped curves. But that's about as much as he is willing to say. Not for him predictions about when the curve will turn in this direction or that. Nor is one of those potted-version economists who like to pin things down on a single causal factor.

He is, instead, content to describe what has happened in over a dozen countries of Western Europe and America over the last five hundred years, leaving the reader to draw his own conclusions and rankings of causes. Thus, in some countries it was trade which caused growth; in others it was the aftermath of war, and in yet others the reason was rapid injections of labour and capital along with technological advances.

Sometimes it was the government which caused it; at other times, in the same places, it hindered growth. Often, but though not always, timing was critical in the sense that the external climate had to be just right for a country to take off. And, once in a while it was plain dumb luck which led to growth. The reason, as must be obvious, varies from time and place and the moral simply has to be that those who seek to copy one or the other success story, will probably end up disappointed.

What about decline, then? What causes that? Again Kindleberger is happy to offer a menu of reasons "" almost identical to the ones that cause growth "" qualifying them with the caveat that decline, like growth, tends to be relative. It is only rarely that it is absolute.

There is, however, one important factor which Kindleberger seems to have left out, namely, the role that a superior ability to organise plays. In other words, he doesn't consider the role of management and managerial leadership.

Economists, especially American ones, often tend to dismiss the non-tangible parts of this as individual or firm-specific, and therefore not mattering at the national level. Or, when they do look at organisation, it is in terms of industrial or market structure issues.

By thus denying the human aspect, they fall victim to the same error of judgement as Marx and Engels (who saw everything in terms of historical determinism) or Jacques Monod (who saw everything as a chance outcome). Both are important, of course, but to deny the individual leader his contribution through a superior ability to organise is really quite fantastically unbelievable. The Germans and the French do rather better on this count. They make an explicit, and quite large, provision for the human factor.

Two questions remain. One is America-specific: is Japan going to replace the US in the 21st century as the implicitly and explicitly acknowledged leader of the world. The other is, more generally, does policy matter?

Kindleberger answers both questions in the negative. About Japan he is dismissive: Japan's burst of vitality from 1950 to 1985 is beginning to taper off and, in the case of policy, he is predictable: policy formulation is cheap.. putting them into practice takes doing.

So what does Kindleberger see for the future? It's best to quote him extensively:

...I predict muddle. Many problems will be dealt with one at a time, others will persist and produce conflicts that linger and mildly poison international economic and political relations. Some agreements reached will not be carried out. On occasion, irresolvable disagreements will gradually fade into unimportance. There will be some regionalism, some co-operation amongst great powers, some persistent low-level conflict. In sum, muddle is indicated. In due course, a country will emerge from the muddle for a time as the primary world economic power. The United States, again? Japan? Germany? The European community as a whole? Perhaps a dark horse like Australia or Brazil or China? Who knows? Not I.

What a pity Kindleberger hasn't heard of us because, of course, that dark horse is going to India!