How wealthy countries acquired rich and why poor

How Rich Countries Got Wealthy and

How come Poor Countries Stay Poor

By Erik S. Reinert

The publication How Wealthy Countries Got Rich and Why Poor Countries Stay Poor is written by Erik S. Reinert and it is printed in 3 years ago. Reinert is actually a 62-year-old Norwegian economist that specializes in development economics and economic history (Wikipedia). Reinert attended the College or university of St Gallen in Switzerland (where he analyzed economics), Harvard University to get MBA, and Cornell University or college for Ph. D. (Wikipedia). In addition to How Wealthy Countries Received Rich and Why Poor Countries Stay Poor, Reinert has created six books which target around the theory of bumpy development as well as the history of monetary thought and policy (Wikipedia).

Reinert isn’t just an prestigious scholar in his field, yet also a distinguished entrepreneur. 39 years ago he founded a small commercial firm that did color sampling to the paint and automotive sectors. Later he developed the firm and added creation plants in Norway and Finland, and by the time he sold that in 1991, the business had become the biggest of its kind in Europe (Wikipedia).

Reinert is influenced by Friedrich List and it reveals in his piece.

Reinert shows that “globalization is a positive-sum video game for all countries if the universe has taken Friedrich List’s path to economic integration (Reinert, 161. ). Friedrich has developed his very own theory regarding the time of charges and cost-free trade, and the sequence essentially goes such as this: (1) an interval of free operate for all countries (2) a period of time when tiny states guard and build their own industries (4) a period when ever all countries establish their own competitive professional sectors (Reinert, 161. ). After going through all the above steps, it’s time to open to get global free trade and globalization is going to benefit poor people nations plus the rich kinds. Based on Reinert’s education level, the amount of exploration and distribution he has been doing in the field of uneven development wonderful work experience, it is usually concluded that Reinert is the two qualified educationally and by experience to write this

book.

How Wealthy Countries Received Rich and Why Poor Countries Stay Poor can be Reinert’s most current English-language book and his purpose of writing this book is to find out the causes of low income and to describe the components that generate the huge gap between the abundant and the poor. He looks through the monetary history of yesteryear 500 one hundred year and proves the monetary structure that many rich countries follow faithfully and eventually make sure they are rich: industrialization policies 1st, free trade second. After the rich countries become rich (e. g. the Western european countries), the kind of economic understanding employed by all of them during their transition from poor to abundant dies plus they comes up with the completely different normal economics (abstract “high theories) for foreign trade to poor countries. As a result, the standard economics, such as the Wa Consensus, demonstrates to be damaging to poor countries and makes them even poorer.

It might be observed the fact that rich countries were individuals who emulated the leading industrial nations, such as the British isles, into “the Age of Industry (Reinert, 123. ) Industrialization is the primary step towards success. With the effect of increasing returns and specialization, the benefit of industrialization goes much further more. Industrialized countries take each of the jobs that require high skills and technology, while the jobs industrialized countries can no longer mechanize or innovate further, just like straightening in the wire, are farmed out to the nonindustrialized countries (Reinert, 39. ) Rich countries produce mechanizable products while poor countries can only produce non-mechanizable kinds and it explains for what reason no country is able to acquire rich simply by only generating raw materials (Reinert, 134. ). An industrial sector is essential for a country to become abundant. As period zips by, technology and increasing returns, which are main sources of economical power, generate economic limitations to entry and produce it even more complicated for poor countries to catch up (Reinert, 40. ). Rich countries specialize in the ideal economic activities also develop economic size and as a result, more labor is needed to carry out the tasks plus the cost of every single unit of product declines (Reinert, 40. ).

Employees are paid more and the items they purchase cost less. Both equally outcomes reflect the two strategies to raise the normal ofliving: to get higher wages or to decrease the prices of goods (Reinert, 131. ). On the other hand, rich countries force the conclusions of standard financial policies that they would not apply at home, upon the poor international locations that are below their wings, such as to get colonies while pure suppliers of unprocessed trash (Reinert, 39. ). The rhetoric-reality distance plays an essential role in keeping poor countries poor. Another factor that is vital to the poor nations around the world is the timing of opening up of an economic system because totally free trade is likely to destroy the most efficient sectors in the least efficient countries (Reinert, 251. ). Most rich countries are industrialized prior to free operate, so that when they enter the industry, they are competent to compete with various other countries and get the maximum benefits from the positive effect but for poor nations, the free transact is like adding frost to snow. To conclude, Reinert perceives the riches as a result of industrialization, together with other factors such as elevating returns, synergies and he blames poverty for deindustrialization, and the wrong timing of totally free trade.

In general, I agree with Reinert’s opinion that industrialization and the regular free transact policy will be the keys to wealth. The development path of China could be a perfect example for this. Chinese suppliers was very prosperous throughout the Tang empire, and many european countries directed scholars all the way to China to understand from its success. But during the Qing dynasty, the government hand picked the policy of isolation and it destroyed the financial development of China. The Qing government restricted the exterior transport and foreign transact. Imported merchandise were greatly taxed. Wide selection and amount of exported goods were limited as well. China isolated alone from other folks while many western competitors were in the process of industrialization. Many industrialized european nations had been seeking new territories plus the deindustrialized Cina without any advanced arms obviously became all their target.

Faultlessly, their machine guns bombed the “locked country. From then on, China discovered lessons and started to select economic structure carefully. Rather than following the instant economic integration, China followed the Marshall Plan whose goal is to reindustrialize. Luckily, China hand picked the right economic structure now and it had been used since proof of the excellence of globalization whilst Russia, a rustic faithfully adopted the guidance given by the earth Bank and IMF, experienced disastrousconsequences (Reinert, 118. ). Although Chinese suppliers has gone returning to the right track, but the fact that China is a developing nation instead of a designed country displays that the scar tissue caused by the mistaken choice of economic plan and deindustrialization hasn’t recovered. The story of China reveals the consequences of failing to recognize the importance of industrialization and timely free of charge trade. The failure explains why poor countries happen to be poor and the presently prosperous countries will be those who take hold of the industrialization and capitalism.

Generally speaking, the book is usually well written. Reinert organizes the book by utilizing sub titles to separate the information and sketching examples from the economic background to support his theories, which make the publication more understandable and dependable. There are just a few graphics, a bibliography and a very lengthy appendix at the end, suggesting there are a great number of facts and in-depth exploration behind the book. The sole problem that I have with this book may be the repetitiveness of theories. Reinert is very dedicated to his idea but occasionally he tends to overemphasize this by duplicating the related theories in various chapters. I would suggest the publication to readers who have a specific interest in the topic of equalization, or the gap between your rich plus the poor. Reinert discusses a whole lot of extremely controversial subject matter and people would like to find out the answers.

Bibliography

T. Reinert, Erik, How Rich Countries Received Rich and Why Poor Countries Stay Poor, Birmingham: Constable & Robinson Limited, 2007 http://en.wikipedia.org/wiki/Erik_S._Reinert

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