I had a bit of a wander around Marrakech on my holiday there last week, and a day-trip to the Atlas Mountains too. Morocco is a medium development country according to the Human Development Index, and that seemed spot on from the few things that I saw. My reaction set me to wondering exactly what it was that a casual visitor encounters that indicates the economic development status of any particular place. Drawing on other travels, I settled on these non-standard but easily visible indicators – but maybe others can challenge them or think of better ones? The criterion (apart from validity) is that they should be easy for anybody to spot even if they know next to nothing abut a place.

1. Waste management – on an ascending scale from human to household to industrial waste (culminating in invisible greenhouse gas management, I suppose). The worst slums I’ve visited have no sewerage, the richest cities are clean and have good air quality. Along the way you get places where people dump rubbish on waste ground, and that includes, for example, parts of Sicily. (I think this indicator also explains why British householders get so cross when their local council tries to reduce garbage collections from weekly to every two weeks. Dealing with rubbish is a basic of effective government.)

2. Paved roads and floors. If they aren’t paved, there is dust or mud everywhere. Houses and children are impossible to keep clean. Transportation is slow – a donkey may be more efficient than a vehicle in the circumstances. Like indicator (1), this impinges on women’s time as well, as women do most cleaning/clearing up.

3. In the same vein, domestic efficiency. I can’t speak for Moroccan homes, having only seen one that was on display for gullible tourists as an example of a “traditional” house; but was interested to learn once from a student from Cameroon that he had never realised that one could have cupboards or shelves that gave things in the home their specific locations. He said his mother could never find anything because items were put down anywhere. I don’t know how universal this indicator is, so include it only tentatively, but nevertheless I think the value of women’s time is a crucial marker of a country’s development. That value is reflected in efficiency in the home and labour-saving devices and features.

4. No set prices. I know there is far, far less everyday haggling than one experiences as a tourist in the market. Even so, having labelled prices that are the same for every customer is essential for the convergence of prices and market efficiency. The alternative is price discrimination to the benefit of sellers rather than consumers, and an absence of the concise summary of information about preferences and resources that is key to the magic of markets. See John McMillan’s brilliant book [amazon_link id=”0393323714″ target=”_blank” ]Reinventing the Bazaar: A Natural History of Markets[/amazon_link] for more on this.

5. Finally, lack of scale. My generalisation here is that lower income countries are more likely to have very few private sector companies operating at sufficient scale. Scale is an important – and sometimes overlooked – aspect of productivity. Here is a picture of the wholesale market for hides in Marrakech, which I stumbled into. These traders have at most a couple of dozen hides each, and are selling them to manufacturers of leather goods in even smaller amounts.(It was an open outcry market.)  One also peers into workshops where youngsters are making small numbers of shoes and bags by hand. Handicrafts? Or just inefficiently small scale?

In the market for hides in Marrakech (Picture by Rory Cellan-Jones)

It was Alfred Chandler’s [amazon_link id=”0674789954″ target=”_blank” ]Scale and Scope: Dynamics of Industrial Capitalism [/amazon_link] that caught my eye first on this top London-based economist’s bookshelf, but anyway other people’s book collections are always compelling. The collection included [amazon_link id=”0684824299″ target=”_blank” ]The Bell Curve[/amazon_link] by Herrnstein and Murray, [amazon_link id=”0691123241″ target=”_blank” ]The Box[/amazon_link] by Marc Levison, Krishna’s [amazon_link id=”0123745071″ target=”_blank” ]Auction Theory[/amazon_link] and – as can be seen from enlarging the picture below – a lot of titles on industrial organization and competition.

[amazon_image id=”0674789954″ link=”true” target=”_blank” size=”medium” ]Scale and Scope: Dynamics of Industrial Capitalism[/amazon_image]

I wonder if anybody can guess the owner’s identity? One clue – obviously the parent of a young child.

Whose books?

Another of my holiday reads was Alaa Al Aswany’s [amazon_link id=”0007243626″ target=”_blank” ]The Yacoubian Building[/amazon_link] (which explains a lot about recent events in Egypt). It’s a terrific novel, but one sentence in particular struck me:

“For some reason, the Faculty of Economics and Political Sciences of Cairo University is associated in people’s minds with affluence and chic.”

The author obviously (and reasonably) finds this mystique hard to understand. Of course, I love the idea that economics can be considered chic – an association that would cause people to howl with laughter in the countries I know well.

So this prompted an obvious question, or rather two: in which countries is economics a fashionable subject, and is this correlated with the proportion of female students? I’m looking for a 0-1 variable in answer to the first (a 1 means yes, fashionable) and a percentage of female undergraduates for the second. I can track down UK and probably US data. If readers can help with others, I’ll report the results in due course.

[amazon_image id=”0007243626″ link=”true” target=”_blank” size=”medium” ]The Yacoubian Building[/amazon_image]

Lounging by a pool on a well-deserved holiday this week, I mostly read thrillers, but my  serious reading was the new edition of [amazon_link id=”0140276041″ target=”_blank” ]When China Rules The World[/amazon_link] by Martin Jacques. It is a very interesting and well-informed book, whose argument I couldn’t agree with. Reading it in the week when Chinese politics took a dramatic turn, with the highly public dismissal of Bo Xilai and detention on his wife in a murder investigation, it seems obvious to me that the China’s future in the world remains highly uncertain, no matter how inevitable the decline of the west appears. (See this analysis in the FT this weekend, and this fascinating Foreign Policy article by John Garnaut on the current political contest in China.)

Having said that Jacques’ historical determinism doesn’t persuade me, the book is nevertheless compelling, and the first edition obviously deserves its best-seller status. The history of China and its entire region is lengthy but stuffed with things I’d never known, and a great overview for newcomers to the subject. Jacques picks up on some interesting points that are often overlooked. For example, he makes I point I’ve often thought important and underestimated:

“We should not forget the increasing importance of Chinese subcontractors as ‘systems integrator’ firms in the global supply chain of many foreign multinationals, a developlment which might, in the long term at least, prove to have wider strategic significance for these multinationals in terms of their management, research capability and even ownership.” (p226)

Jacques is also interesting on aspects of Chinese culture. He is far too much of a cultural relativist for my taste – women’s rights for me are a universal, and people never seem bothered about political freedom until, suddenly, they are. However, the book gave me real insight into the very different perspective on the state, with its Confucian origins, in China. It is also eye-opening on Chinese racism. This is a subject of which the author has tragic first-hand experience, given the death of his Indian wife due to her wholly inadequate care in a Hong Kong hospital. It does make one wonder about the future of China’s investments in Africa.

However, the Chinese economic model is understandably of great interest to developing countries, and Justin Yifu Lin at the World Bank is one Chinese economist who is helping move the global development consensus away from the disgraced “Washington Consensus” to a far more statist approach (see this pdf). Jacques sums up the Chinese approach as a competent and strategic state combined with extremely vigorous competition – including competition between state firms and between them and the private sector. He writes:

“First, there is a ubiquitous state, operating at national, provincial and city level, which is highly active and involved in multifarious ways in the economy and society. Second there is, at the same time, a powerful commitment to the market and a very strong belief in competition: the Chinese government is inimical to monopolies.” (p621)

This combination looks rather compelling to other countries whose governments would like to emulate China’s growth record. But it may be that the role and economic competence of the state in China, combined with its uniquely large scale market, will make it hard for others to follow the same model. In many poor countries the state remains predatory, as Acemoglu and Robinson so forcefully point out in [amazon_link id=”1846684293″ target=”_blank” ]Why Nations Fail[/amazon_link].

As for China’s politics and geopolitical status, the events of the past week seem to me to illustrate the uncertainty. China may ‘rule the world’ one day but it is surely, to borrow the famous saying, too soon to tell.

[amazon_image id=”0140276041″ link=”true” target=”_blank” size=”medium” ]When China Rules The World: The End of the Western World and the Birth of a New Global Order[/amazon_image]

I was dipping into [amazon_link id=”052149964X” target=”_blank” ]Economic Growth in Europe Since 1945[/amazon_link], edited by Nick Crafts and Gianni Toniolo, and published in 1996, interested to see what difference of perspective the intervening 16 years and Great Financial Crash have brought. The collection very much focuses on the insights of endogenous growth theory, on human capital formation and technology transfer. However, the editors’ essay notes that these factors do not tell the whole story of the Golden Age, les Trentes Glorieuses. They highlight also trade liberalization. And add, interestingly:

“A full understanding of Europe’s Golden Age of economic growth requires a subtle appreciation of the impact of policy and institutions on incentives to invest and obstacles to complete catching up.”

The subsequent chapter by Barry Eichengreen emphasises labour market institutions as the main explanation for differences between European countries, while Mancur Olson looks at Eurosclerosis through the lens of rent seeking. Both actually stand the test of time pretty well. Worth revisiting now that growth is the only hope of a benign path out of the mess we Europeans are in now.

[amazon_image id=”052149964X” link=”true” target=”_blank” size=”medium” ]Economic Growth in Europe since 1945[/amazon_image]