A possible road map to international economic development
Regional, Analysis, 1/14/2000

The world has never been more prosperous and yet there is great disparity in the economic income level between the wealthiest countries and the poorest.

Along with poverty comes many ills, such as political and social instability and health and environmental deterioration, and most certainly poor education and a lack of liberty.

The problem the way it has been described in the past seems intractable. Poverty brings the aforementioned problems in political and social instability and lack of freedom, and these problems in turn bring about economic impoverishment. A vicious circle. A catch twenty-two of sorts.

So far the remedies have been that the rich countries provide some aid that is implemented to build infrastructure and to help in social assistance programs, and military aid programs. For the most part, these programs have been a failure as there are no demonstrable countries that one can point to and say with confidence, "This country has been moved from a third world status to a first world status." There is South Korea, somewhat, but South Korea, along with Taiwan and some of the other countries that have improved economically have tended to form a "belt" of countries that surrounded the communist countries, and as such, received in addition to intensive aid, a transfer of technology and an open market for the products of this technology transfer. Thus the Asian Pacific rim. And so Japan and Germany, and France and Italy and England received a "massive" program of aid and technology that allowed them to rebuild post WWII, a program known as the Marshall Plan.

The Marshall Plan worked because there were political, social and technical foundations in those countries that could assimilate this aid and use it effectively. There were no Third World corruption practices, in those countries, be it in politics, economics, or law. Nonetheless, the Marshall Plan worked because it was massive. It provided factories and a market for those factories. This was needed till the momentum of the rebuilding and reconstruction was strong enough that their economies could be self-sustaining. The Marshall Plan, as in the Pacific, was self-motivated, to set up a "belt" or a fence against the communist countries. But the Marshall Plan was very much in the interest of the USA not only for defense matters, but for political, social and economic stability and prosperity. Without the visionary leadership of those Americans involved and their tenaciousness, such a program would have been impossible because of internal domestic opposition because of its cost and because it is considered foreign aid. It is hard to believe that anyone can argue that the world is not a much better and more prosperous place had it not been for the Marshall Plan. More specifically, it has been great economically for the USA. But all programs with long-term benefits are difficult to bring about.

Japan had a similar but less-visible program. US companies in droves gave technology to Japanese companies and provided a great market. Japan had a very strategic importance to the USA on many fronts, but nonetheless, Japan became and was viewed as a competitor to the USA and to Europe. Some may see this as a negative, but no free market economist would ever believe that more competition is not better for the consumer. Of course, we are talking about a "proper" free market where predatory and monopolistic practices are illegal. Nonetheless, the benefits to the world have been dramatic. Some may care who invented a CD player, or a cancer treatment, or a vaccine for pox, but we think that is shortsighted thinking in an idealized free market. One is always happy to have these products when needed, no matter where they come from. Does a patient care who invented a drug or who makes it if it is the only one available or affordable? Not really, but because we are not in an idealized free market, it does make a difference, at least to the citizens of each of these countries where the view on employment is a win-or-lose situation. So the citizens of the wealthy countries will view aid and transfer of technology as a threat to local industry. This being the reality of the world, it is difficult to see how to get around this issue, and self-enlightenment and ideal conditions for a world free market do not exist. So how does one solve this problem?

We see further manifestations of this problem in trade disputes between developing and undeveloped countries where there are very low standards of living are being prevented from selling to the richer and developed countries the very few products that they can produce domestically and sell competitively. It seems that the developed world is more interested in doling out aid that has some short-term effect on a host of issues, but not willing to provide the instruments for long-term successful development. And sometimes this problem is not intentional, as a poor undeveloped country has so many needs-- such as vaccine, sewer systems, roads, education, and electricity-- and there is only so much aid that the world has been willing to give. So we are back to a cost benefit analysis of to whom the aid should be distributed and for what purpose. It is like a patient walking into a doctor's office with ten diseases, and the doctor does not know where to start. Many times, doing a little bit to each of these diseases does nothing to help the patient. An approach of all-or-nothing is needed for some patients. But there are too many patients. Who gets the limited medicine? Is it better to split the medicine equally among the patients and have them all do poorly, or is it better to give the available medicine to a few, knowing that they will be healed? Is it moral to deny the other patients when we know that at least some of the patients will do very well and recover, and the others will not be given any medication? Maybe the answer is a qualified yes!

These are difficult questions in a world of limited resources. We have very poor undeveloped countries doing poorly and developing countries that are making progress. So how much aid do we give and how do we distribute the aid between the undeveloped and developing countries? We start with the premise that it is better to teach a person how to fish than to give him fish, and we add that at the beginning, you need to give him some fish too while you are training him how to fish. The Salvation Army does not only pray for people to find their way to salvation, but they make sure that their stomach is full too, so that they can find salvation and have something to be thankful for.

But that is very costly economically, as in this case, we will be giving aid, technology and a market to these countries. That simply cannot be done for all the undeveloped and developing countries. So how do we select? Here again, we go by the premise that it is better to give aid to those who are able to use the aid most effectively and stand the best chance of developing, so that they too in turn can become an engine of development and aid to the poorer countries. Here, we get to the heart of the matter. The world needs "economic engines" that pull it along for proper development. We do not want few engines pulling many riders, but many engines pulling few riders. The idea is that each time a new "economic engine" is created and added to the world economy (i.e. the proper development of a country), the world is one country richer, and one poor country (a burden) is removed from the list of countries that "drag" the world economy instead of "pulling" it forward.

If this makes any sense, then what is needed is a strong focus on countries that are already making great progress, but nonetheless need assistance to become autocatalytic (i.e., self sustaining in their economic development, either internally or as part of the international economy).

It is very difficult for a country to pass from a undeveloped stage to an developing stage, and it is more difficult to pass from an undeveloped stage to a developed stage. History bears that out. So we can conclude that we will have to focus on developing countries first and give them very focused aid (massive aid= loans, technology and markets, management expertise in political, economic and social matters), aid to help them cross from developing status to developed. "It is better, we believe, to effectively help 10 countries, rather than to ineffectively help 100 countries."

What would those 10 countries be asked in return for such a massive assistance. That they adopt political, economic and social standards that have been proven to work. This will not be shoved down anyone's throat. But if a country wants this aid, there would follow a list of issues it should address (a la European Union standards), where a country could not join until certain standards and practices were carried out. This requirement would include massive political and administrative reforms, along with additional ingredients that are necessary for development (such as rule of law, transparency, human rights, press freedom, zero corruption). For agreeing to these rules, a great infringement on some countries' so-called sovereignty, the country would be guaranteed a fast road to development, demonstrated by massive direct investment in the economic and social institutions resulting in a constant and healthy increase in GNP for a period of (lets say) 25 years. We think that with today's technological advancement and the ease of transferring much of this advanced technology, it should be possible to sustain 15 to 20% steady GNP growth rate for these countries, catapulting them in a short period of time to a developed status that they can in turn economically pull the other less developed countries.

The current practices of the international economic bodies (including the World Bank and IMF) of giving aid, many times too small, too late and in many cases cause damage with their uncoordinated half measures that are well-intended and would work in a developed economy but are pure disaster for an undeveloped or developing economy.

But is this feasible in today's political environment in the countries that would have to be doing the giving? We are not sure. Some leaders have spoken with great understanding of the problem and with great vision and courage, and others are hostage to their domestic concerns, unable to lead the way and engage in the debate at the national level. Leadership is never easy, and some, understandably, want to survive to fight another fight. These positions are understood. But the world always cries for strong leadership.

It is better, we believe, to effectively help 10 countries, rather than ineffectively help 100 countries. This way, today's limited aid that is being given is concentrated to become effective. This has the added advantage that the results will be visible to those giving the aid, thus gaining more domestic support. In addition, more measures would be needed that do not involve direct aid. These would be political decisions, decisions that have economic implications but do not bear strong resistance from the donor countries.

We are talking about encouraging countries to coalesce around regional economic blocs. These blocs allow their member states to trade in products that are suitable for the markets of the countries in the same bloc, as these countries tend to have the same level of development. This also provides the feeling of internal economic security (a feeling of not being exposed to world markets that are very advanced compared to theirs and in which they are unable to compete at this stage of their development). No one really should want to have 7 foot tall giants playing a game of basketball with 5 foot midgets. Equality sounds fine, but in this case, a world of a very imperfect free-market, equality is an illusion and can be very damaging to the countries that we wish to help. All the developed countries had done a great job of protecting their markets when it suited their purposes and know that they are 7 foot tall, but they claim that it is bad for the other developing countries to do the same. One thing that is obvious here is that, unlike what is constantly preached, different rules of playing the game at different stages of development are good, not bad.

So here again, we see that in actual practice, developed countries are constantly pushing the undeveloped and developing countries to play by their rules, rules that they rejected themselves when they were developing. Thirdly, rules for development should not only be different at different stages of development, but they should also take into account the size of the country involved. What is appropriate for a country of one billion people is not necessarily appropriate for a country of one million.

So why do we strongly recommend regional blocs as a means of development? Simply for the purpose of providing a large enough internal market for that market to have the potential to develop, and once developed, to have the resources to become self-sustaining. The world will also gain an additional economic engine and with all the benefits that this entails.

To summarize again, we need economic blocs, and in those blocs, we need to strongly support the developing countries that form the center of these blocs. This is in order to create an economic chain reaction that is self-sustaining. This brings us back to the political decisions that the developed countries can make that would be helpful in this regard, such as real support for a world development based on strong regional blocs. Despite stated public policy, this is currently not the case. To the contrary, constant efforts have been exerted in the past to subvert such efforts, be it in the Arab states (Arab League), in Latin America (Mercosur), Asia (Asean), and even in Europe! Today's economic powers have viewed these blocs as economic threats and have tended to adopt policies that undermine them, though with some concern about protectionism, it is a shortsighted policy as it did not try to attack unjustified protectionism and attacked the foundation of the economic bloc itself-- two different issues that lead to two different ways of dealing with a problem!

What is needed as a policy for world economic development is the creation of economic engines on all the continents. These economic bloc engines would themselves have internal economic engines at their centers. These centers are developing countries that would each receive the equivalent of a "Marshall Plan" to develop it. The development would be based on "proven" political, social and economic concepts. It is worth noting that that economic blocs would not negate existing groupings such as COMESA etc., thus providing trade between the economic blocs themselves, and between the economic groups themselves.

These regional blocs, for example, should be based on regional proximity (similar culture) and a minimum number of population concentration (such as a minimum of a population of 150 million), with an economic status rated near "developing." Some of these blocs would be a South Africa bloc (centered around South Africa), Latin America (centered around Brazil, Argentina), North America (centered on US- Canada-Mexico), Southeast Asia (centered around India and Pakistan), Pacific bloc (centered around China, Japan, S. Korea, Indonesia), Russian bloc (centered around Russia), Arab States block (Egypt, Morocco, Algeria, Iraq, Syria, (with Saudi Arabia and Emirates not needing help)), etc.

Will the G-7 countries help implement such a Marshall Plan for world development, realizing that the creation of an international middle class is the greatest achievement for human kind in terms of economics, politics and social development? Will the West see that it is in its absolute best long-term interest that these great things they achieve domestically are also very good and should be achieved internationally? For those who agree with this, then what has held us back is implementation. This, we think, provides a possible road map.

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