There is an interesting pattern I found during my study of economic history of different countries. Irrespective of their location, size and affluence level, they all went through similar growth trends. The countries include Mexico & Brazil (developing countries, Latam region); Spain, Italy, Ireland (developed countries, Europe region); and Korea, Australia (developed country, Asia-Pac region).
If we look at their history since WWII, 1950s-60s were periods of growth, 1970s-early 80s saw economic slowdown, 1980s-1990s were periods of liberalization and growth, late 1990s saw growth hiccup again and 2000s mostly higher growth again.
Most of these countries started out as struggling economies. However, the period in 1950s-60s was mostly of high growth owing to reconstruction post-WWII. Another common feature was tendency for high government control and protection of domestic markets. Some countries focused on exports, others didn’t. 1970s-early 80s was a period of slow growth for most countries. Oil shocks were the most common reasons. Following this, most countries decided to implement reforms in the economy and liberalize it. For European countries a big driver was the membership of EU. All the countries also benefited from lower interest rates globally. All in all situation improved in late 1980s-90s and economic growth accelerated again. However, economic growth was hit again in late 1990s for various reasons. The most common response of developed countries was lower interest rates and they experienced a debt fueled growth in 2000s until 2008.
All these time periods are approximate and reflect a general trend. These won’t exactly be true for each country, but generally true for aggregate whole.
There are several interesting suggestions given by this pattern:
If we look at their history since WWII, 1950s-60s were periods of growth, 1970s-early 80s saw economic slowdown, 1980s-1990s were periods of liberalization and growth, late 1990s saw growth hiccup again and 2000s mostly higher growth again.
Most of these countries started out as struggling economies. However, the period in 1950s-60s was mostly of high growth owing to reconstruction post-WWII. Another common feature was tendency for high government control and protection of domestic markets. Some countries focused on exports, others didn’t. 1970s-early 80s was a period of slow growth for most countries. Oil shocks were the most common reasons. Following this, most countries decided to implement reforms in the economy and liberalize it. For European countries a big driver was the membership of EU. All the countries also benefited from lower interest rates globally. All in all situation improved in late 1980s-90s and economic growth accelerated again. However, economic growth was hit again in late 1990s for various reasons. The most common response of developed countries was lower interest rates and they experienced a debt fueled growth in 2000s until 2008.
All these time periods are approximate and reflect a general trend. These won’t exactly be true for each country, but generally true for aggregate whole.
There are several interesting suggestions given by this pattern:
- There have been common drivers for global economic growth in the past. Then, the interconnected world of today will also need a new global growth driver. In absence of this, global growth will stay low.
- The drivers of growth have varied with time and were in accordance with the political and economic situation at a given time. Given that, drivers of growth today will have to be those that help solve today’s issues, and not necessarily a rehashed version of previous years.
- Economic liberalization was widely adopted only in last 20-30 years. While it did lead to rapid growth, it has not been the only driver of growth in long term. Therefore, further liberalization is not necessarily the best way forward. However, the countries where significant inefficiencies exist will benefit from reforms.
No comments:
Post a Comment