Interesting stuff. This sounds a lot like a planned economy, with bureaucrats or elected officials guiding capital into selected industries. How does this not turn into corrupt bribery schemes for favored nephews?
No, it is nothing like a planned economy. The amount of resources dispersed is tiny compared to the overall economy, and it is only dispersed to economic sectors that are not currently large and politically influential.
Everything a government does can devolve into a "corrupt bribery scheme for favored nephews" but I think this is less likely in my proposal because:
1) Targeting industries is based on transparent algorithms published on a third-party website. This dramatically cuts down on the discretion of government officials.
2) Most of the steps that I discuss in the second article require very little money. The focus is more on copying and sharing knowledge and skills.
3) Many of those who receive money are foreign experts in the targeted industry, and corrupt officials are unlikely to get political favors from them in return.
4) Continued funding beyond the initial seed money is based upon clear, transparent export metrics. If other citizens of other nations are willing to buy a company’s product, that company must be doing something right. This gives evidence for a further round of funding. If not, funding should be cut off.
Now of course a corrupt government could pretend to follow my advice but they just distribute money to favored individuals or organizations, but they could do that anyway.
My hope is that this strategy creates a domestic venture capital industry that can do most of the hard work going forward.
This model worked very well when bringing smaller East Asian countries into the global economy. Japan could make cars, Korea phones, Taiwan semi-conductors.
China tried to copy this model, but they are so huge it remains to be seen if they can ride that model all the way to be rich. Perhaps not. I suspect they need to somehow become the global economic hegemon and make their own demand, rather than asking what western nations want and then making it.
Tough to pull off, but maybe the only way for a latecomer with too many people to pull it off.
Thank you for a thoughtful reply. I agree that domestic VC can take the reins, which is ideal. Getting to that point is very difficult
Interesting stuff. This sounds a lot like a planned economy, with bureaucrats or elected officials guiding capital into selected industries. How does this not turn into corrupt bribery schemes for favored nephews?
Thanks for the comment.
Not sure if you read the second part of this series, but I explain in more detail here:
https://frompovertytoprogress.substack.com/p/how-developing-nations-can-create-db0
No, it is nothing like a planned economy. The amount of resources dispersed is tiny compared to the overall economy, and it is only dispersed to economic sectors that are not currently large and politically influential.
Everything a government does can devolve into a "corrupt bribery scheme for favored nephews" but I think this is less likely in my proposal because:
1) Targeting industries is based on transparent algorithms published on a third-party website. This dramatically cuts down on the discretion of government officials.
https://oec.world/en
2) Most of the steps that I discuss in the second article require very little money. The focus is more on copying and sharing knowledge and skills.
3) Many of those who receive money are foreign experts in the targeted industry, and corrupt officials are unlikely to get political favors from them in return.
4) Continued funding beyond the initial seed money is based upon clear, transparent export metrics. If other citizens of other nations are willing to buy a company’s product, that company must be doing something right. This gives evidence for a further round of funding. If not, funding should be cut off.
Now of course a corrupt government could pretend to follow my advice but they just distribute money to favored individuals or organizations, but they could do that anyway.
My hope is that this strategy creates a domestic venture capital industry that can do most of the hard work going forward.
This model worked very well when bringing smaller East Asian countries into the global economy. Japan could make cars, Korea phones, Taiwan semi-conductors.
China tried to copy this model, but they are so huge it remains to be seen if they can ride that model all the way to be rich. Perhaps not. I suspect they need to somehow become the global economic hegemon and make their own demand, rather than asking what western nations want and then making it.
Tough to pull off, but maybe the only way for a latecomer with too many people to pull it off.