How Can Developing Countries Bolster Economic Growth Through Productive Knowledge
For developing economies, the most critical factor in wealth creation is the existence and protection of property rights. However, this isn't sufficient on its own; the application of productive technical knowledge as skills and tools (Productive Knowledge) is the linchpin that drives economic growth.
Smart Empire: The Most Effective Recipe for Wealth
Historically, the Smart Empire model, where resources flowed from the peripheries of the Global South to imperial centers, has been highly successful. This model mobilizes resources, attracts investments, and fosters economic development. The key is an attractive ideology that galvanizes the masses, facilitating conquests and wealth accumulation.
The Necessity and Sufficiency of Productive Knowledge
In scientific theory, a cause is both necessary and sufficient to give rise to an effect. This means the conditions that drive economic growth must be universal, present in every instance, and invariant across time and space. Let’s investigate this critical factor.
Development of Land and Labor: To develop a factor of production—such as land or labor—means applying creative technical knowledge. In land, this can mean techniques like precision agriculture, improved irrigation, and pest control, which lead to a higher output per unit of input. In labor, this involves acquiring new skills and utilizing new tools, reducing the time needed to complete a task and achieving automation eventually.
Case Study: The Green Revolution in Bangladesh
A poignant example is the Green Revolution in Bangladesh, where the output of food per acre of farmland almost quadrupled from 292 kg in 1960 to 2367 kg in 2020. Despite a 45% decrease in the amount of land under cultivation and a nearly four-fold increase in the population, per capita food output also increased. This stark increase in productivity is due to the application of agricultural knowledge through new tools and techniques.
Natural Resources: Not a Limiting Factor
Mathematically, the derivative of a constant is zero; thus, increasing productivity is not tied to the amount of natural resources. Advanced economies, like the USA, UK, and Japan, get less than 1% of their real GDP from natural resources. This suggests that natural resources alone do not constrain economic growth.
Non-mathematically, the amount of land available far exceeds the global demand for food. With the suitable technology and knowledge, the planet can easily support a population much larger than the current one. Therefore, the availability of land is never a binding constraint on food production.
The Universal Role of Productive Knowledge
Throughout history and across all countries, regardless of their state of development, the process of development is driven by the application of productive knowledge. No additional or different elements are needed beyond this knowledge. Developing countries can significantly enhance their economic growth by focusing on education, technology, and innovation, ensuring the widespread application of such knowledge.
Forward-thinking policies and initiatives that foster innovation and investment in technology and education will be the catalysts for sustained economic growth. Property rights, when protected and applied, will further enhance the incentives to innovate and invest in these areas.
By leveraging Productive Knowledge and protecting property rights, developing countries can achieve substantial and sustainable economic growth.