Wealth Of Nations: The Modern Illusions Of Economic Development

Essay: Europe and the West are considered the "developed" world, while countries such as China are said to be "developing." But such mentalities don't really match the respective realities of wealth, in all its

1950s, California, when the West was on the rise (aroid)
1950s, California, when the West was on the rise (aroid)
Betty Ng

From one point of view, Europe is rich, but also down and out. Similarly, China can be seen as prosperous, but poor at the same time.

The word "developed" has always been synonymous with "rich," while the words "developing" or "emerging" are often a polite way of saying "poor." In the past decade, and in particular after the outbreak of the financial crisis, the meaning of these terms has changed a great deal. Now "developed" is actually reminiscent of "financial hardship" or "declining," whereas "developing" or "emerging" means "awash with cash."

Even if the division between the developed and the developing or emerging countries remains broadly unchanged, the definition of "rich country" and "poor country" is rapidly evolving -- and ever more difficult to define.

This decoupling is partly due to the fact that the definition of "developed country" implies a much wider scope, not just economic -- where other factors must be be taken into account such as the cultural level, the general level of health… etc. Wealth is but one of these elements. A country can be developed, but not necessarily rich. In other words, economically-speaking it might qualify as "decent" but not wealthy, just like having a better education might increase one's income, but is never a guarantee.

Yet some developed countries insist on regarding themselves as rich, and they act as such consistently. Meanwhile, certain developing or emerging countries insist on considering themselves as poor, and make decisions and act accordingly. This might sound odd, but in fact such modes of thinking help to explain how countries rise and fall.

Rather than arguing who is developed or not, one might as well change the perspective and talk about rich and poor.

So what happens when a rich country considers itself as poor and a poor country regards itself as rich?

The Chinese model

Take China as an example. After a long period of being ravaged by foreign occupation as well as civil wars, it opened up its economy as late as the 1980s, so it still maintains the mentality of a poor country. China lacks a sense of security and is particularly cautious in focusing on saving for a rainy day and preparing for emergencies.

It is very wary in the management of its treasury, and favors saving over spending. Such a tendency has become a sort of subconscious instinct. China maintains and defends its currency at a low and pegged exchange rate so as to assist export growth and bring in more and more foreign currency.

In the past three decades, its poor country state of mind has helped China build a long-lasting positive international balance of payments and accumulating vast foreign exchange reserves. This has proved quite useful in the global financial crisis. Even though the average living standard in China is not yet high, in terms of treasury China is already one of the world's richest nations.

Western European countries have had a very different experience from China's during the same period. Even the two World Wars that brought colossal economic losses did not change their deep-rooted mentality of being rich countries. They went on developing the same consumption habits and lifestyle that they were accustomed to. While these countries' output and exports are in fact insufficient to maintain their high living standards, they raise their internal and external borrowing to make up for the deficit.

In living standards, most European countries remain at a "developed" level. Basic necessities such as water, electricity, telecommunications, education and health care are readily available to the general public.

But in terms of state finances, many of the European countries are finding themselves trapped in a crisis, and even moving toward poverty. The surge of unemployment in Greece and Spain shows that in the next few years their average national living standard will have to be painfully lowered. Their rich country mentality is unfortunately not keeping up with the reality of their economic recession.

However, this doesn't mean China's poor country mentality is definitely superior. It has its own issues. China is no longer a poor country, but it isn't yet developed either. Excessive saving has deprived its people of a higher living standard and prevented them from developing their potential.

Reality sets in

Besides, when a country is uneasy with its finances it is often either too conservative or too enterprising. When too conservative, it can result in idle savings, very low risk and low-performing investments. This in turn causes the surplus to be eroded by inflation. On the other hand, speculative enterprise and investment in high-risk projects with the hope of catching up with the rich countries may also be counterproductive and cause losses.

Therefore, when a country's mentality doesn't evolve gradually with the economic reality, when its actions are based on subjective historical standards rather than on objective conditions, it will create serious problems.

But for most countries, changing the general state of mind itself requires efforts. This may arouse anxiety and fear, particularly because change sometimes also means losses.

This explains why it took so long for the debt-ridden European countries to face up to their problems. They are compelled to pay extremely high interest rates that they can't afford. Meanwhile, this is also why the Chinese currency has risen to the current level, so China can alleviate inflation. In both cases, it's reality that obliges a change of mentality and behavior. Naturally, if one is to choose between the two for investment, the choice is obvious.

Read the original article in Chinese.

Photo - aroid

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Saving The Planet Is Really A Question Of Dopamine

Our carelessness toward the environment could be due, in part, to the functioning of a very primitive area of our brain: the striatum.

Ad scuba-diver and brain coral

Stefano Lupieri

PARIS — Almost every week, a new scientific study alerts us to the degradation of the environment. And yet, we continue not to change anything fundamental in our systems of production and habits of consumption. Are we all suffering from blindness, or poisoned by denial?

In his popular books Le Bug humain (The Human Bug) and Où est le sens? (Where is the Sense?), Sébastien Bohler, a journalist in neuroscience and psychology, provides a much more rational explanation: The mechanism responsible for our propensity to destroy our natural environment is in fact a small, very deep and very primitive structure of our brain called the striatum.

This regulator of human motivation seems to have been programmed to favor behaviors that ensure the survival of the species.

Addictions to sex and social media

Since the dawn of humanity, gathering information about our environment, feeding ourselves, ensuring the transmission of our genes through sexual intercourse and asserting our social status have all been rewarded with a shot of dopamine, the 'pleasure hormone.'

Nothing has changed since then; except that, in our society of excess, there is no limit to the satisfaction of these needs. This leads to the overconsumption of food and addictions to everything from sex to social media — which together account for much of the world's destructive agricultural and energy practices.

No matter how much we realize that this is leading to our downfall, we can't help but relapse because we are prisoners of the dopamine pump in the striatum, which cannot be switched off.

Transverse section of striatum from a structural MRI image

Lindsay Hanford and Geoff B Hall via Wikipedia

Tweaking genetics 

According to Bohler, the only way out is to encourage the emergence of new values of sobriety, altruism and slowness. If adopted, these more sustainable notions could be recognized by the striatum as new sources of dopamine reward. But there's the challenge of promoting inspiring stories that infuse them with value.

Take the photo-collage exhibition "J'agis ici... et je m'y colle" ("I'm taking action here... and I'm sticking to it"), a collection of life-size portraits of residents committed to the energy transition, displayed on the walls of the French coastal city of La Rochelle.

Backed by the French National Center for Street Arts, photographer Martin Charpentier may be employing artistic techniques, but he's also tinkering with neuroscience in the process.

Les Echos
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