Tropical Underdevelopment

1
Tropical Underdevelopment

• Jeffrey D. Sachs

2
Introduction

• Economies in tropical zones have grown at slower
  rates than temperate zone economies.
• Technology spillovers in the core agriculture and
  health industries have yet to produce the
  catch-up anticipated by economic theory.
• Innovation in the tropics lags behind that of the
  temperate zones.
• The population of tropical countries remains less
  urbanized, increasing the prosperity gap.
• And, Globalization has done little to capitalize
  on the comparative advantage of tropical
  economies.
• Sachs seeks to explain why.

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Definition of Tropical Zones and Observed
Multiplier on Average GNP

• Two primary definitions
• Geographical
• Ecological
• Sachs favors the Koeppen-Geiger (KG)
  classification.
• Differentiates regions by temperature and
  precipitation (ecological measure).
• See Figure 3
• Sachs aggregates these regions into tropical,
  non-temperate, and temperate zones as shown in
  the table.
• He further compares regional proportions of
  average world GNP using best accepted estimates
  available (PPP adjusted GNP statistics).

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Figure 3
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Table 1
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Economic Trends in Countries Classified as Tropic

• Starting from 1820 (Maddison Data) Tropic had 68
  per capita income of Temperate.
• Growth rate in Tropics is 0.9 compared to 1.4
  in Temperate Zone.
• By 1992 Tropic per capita income falls to 25 of
  Temperate per capita income.
• See Table 2

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Table 2
8
Latitude and GDP
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Explaining Tropical Underdevelopment

• Possible Causes
• 1. Colonization
• May have had adverse affects on economic
  development
• Pattern of underdevelopment did not end with end
  of colonization
• 2. European Capitalism
• Capitalism Economic Growth European Culture
• So Temperate Zone Advantages because of European
  Capitalism
• Contradictions
• -East Asia
• -Africa

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Sachs Explanation

• Technology for Production in Tropical Regions has
  lagged behind Temperate Regions
• - Health
• - Food Production
• Technology is not easily diffused across
  ecological zones

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Food Production

• Major Staple Crops (rice, wheat, maize)
  productivity is higher in temperate zones than in
  tropical zones
• Grain yields per hectare are 51 higher in
  temperate zones than non-temperate zones

12
Soil Formation and Erosion

• Soils affected by heavy precipitation, rapid
  mineralization, leaching of organic compounds
• Rainforests Most nutrients found above ground,
  when cleared for agriculture, land is not
  sustainably productive
• Low Cation Exchange Capacity reduced ability to
  utilize fertilizers on a sustained basis
• Winter frost helps to stall mineralization and
  results in buildup of deeper and richer top soils
  over time.

13
Pests and Parasites

• Tropical Regions have a high prevalence of pests
  and parasites with high biodiversity
• No winter frost to kill pests means a year-round
  problem
• Cause high plant disease and crop spoilage

14
Plant Respiration and Net Photosynthesis

• Net Photosynthesis Photosynthesis Plant
  Respiration
• Warmer climate higher rate of respiration
  less net photosynthesis and production

15
Water Availability

• Evapo-Transpiration
• Rapid evaporation of surface water
• Rapid Transpiration of water through plants
• Tropical Areas also subject to severe drought,
  excessive precipitation and extreme fluctuations

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Health

• The Burden of Disease is Higher in Tropical Zones
• Health Outcomes are better in temperate zones
  even after controlling for levels of GDP
• Infant Mortality in Temperate Zones is 52 lower
  than Non-Temperate
• Life Expectancy is 8 higher in Temperate Zones

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Health

• Effects
• Reduced Labor Productivity
• - Loss of Work Days
• - Reduced Physical and Mental Capacity
• Burden on Fertility Rates, Population Age
  Structure, Overall Population Growth Rates

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Diseases

• Human Host Transmissions Require high
  temperatures
• Bacterial infections favor warm, moist
  environments
• Tropical Climates support year-round transmission
  and higher rates of death

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Geology and Disease

• ID rates were high around the world until 1800s
  when Europe and North American Rates Declined
• Improved Nutrition
• Public Sanitation
• Immunization
• Tropical Vector-Borne Diseases are harder to
  control and lack immunizations
• Tropical Zones had less improvement in nutrition
  and sanitation

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Energy Resources

• Industrialization fueled by coal and hydrocarbons
• Access to fuel contributed to economic
  performances
• Coal Deposits are overly concentrated in
  Temperate Zones
• 10 Countries hold 90.2 of Global Coal Supply
• Only One (India) is not in the Temperate Zone

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Forces of amplification of tropical
underdevelopment

• 1820 Per capita income of non-temperate
  regions 70 of per capita income of
  temperate regions.
• 1992 Per capita income of non-temperate
  regions 25 of per capita income of
  temperate regions.
• There are 3 factors amplifying this tropical
  underdevelopment
• Technological change
• Demographic transition
• Temperate-zone power

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Amplifier 1 Technological change in temperate
zones vs. tropical zones

• Increasing returns to scale in economic growth
• The rich get richer
• Large market ? More innovative activity ? More
  economic growth ? Larger market
• BUT recent evidence shows poorer countries grow
  more rapidly than richer countries.
• Not whole picture Diffusion of innovation not
  taken into account.

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Amplifier 1 Technological change in temperate
zones vs. tropical zones

• Krugman model Different levels of technology
  between 2 regions depend on
• Technological innovation in each region
• Diffusion of technology across regions

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Amplifier 1 Technological change in temperate
zones vs. tropical zones

• Based on Krugmans model, Sachs thinks tropical
  underdevelopment exacerbated by
• Higher rates of innovation within temperate zones
  
• Low rates of technological diffusion across
  temperate and tropical zones due to ecological
  conditions
• Explains differences in health and agricultural
  technology.

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Table 3
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Amplifier 2 Demographic transition

• What is demographic transition?
• Transition
• High-fertility, high-mortality society
• Low-fertility, low-mortality society
• Advantages
• More income spent on each child
• Slower population growth
• Higher proportion of population at working age

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Amplifier 2 Demographic transition

• How does poor food production impact demographic
  transition?
• Slower shift from rural to urban areas ? higher
  fertility rate.
• How does poor public health impact demographic
  transition?
• Higher mortality rates are compensated by higher
  fertility rates
• Evidence Total Fertility Rate (TFR) in temperate
  zones 56 TFR in tropical zones.

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Amplifier 3 Temperate-zone power

• Temperate zones
• Economic advantage ? Military advantage
• Tropical zones
• Economic underdevelopment ? geopolitical
  weakness
• COLONIZATION

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Amplifier 3 Temperate-zone power

• What was the effect of colonization on tropical
  underdevelopment?
• For Sachs, negative long-term impact
• Neglect of public goods (education and health)
• Suppression of higher education
• Political oppression
• Suppression of local industries in favor of cash
  crops and extractive industries
• Evidence Countries under longer colonial
  domination have lower levels of GDP.
• Today Temperate-zone countries dominate global
  financial and development institutions (IMF).

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Tropical success stories

• Economic convergence was possible for the
  following tropical-zone countries
• Hong Kong
• Singapore
• Taiwan
• Malaysia
• Mauritius
• Thailand and Indonesia (pre 97-98)
• Reasons for this success
• Improved public health ? lower TFR
• Focus on export-oriented production ? new sectors

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Conclusion

• Persistent tropical underdevelopment linked to
  ecological forces along with social dynamics.
• What does this imply?
• For policymakers
• Market reforms alone will not resolve the issue.
• Need for concerted international effort to
  develop social institutions that will help
  diffuse innovation within tropical zones to
  improve food production and public health.
• Programs adapted to specific geography of each
  region.
• For economists
• Integration of ecological and economical
  perspective
• A new challenge environment and poor countries

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What do you think?

• Do you agree with Sachs conclusion addressing
  tropical underdevelopment implies a new focus on
  geography rather than emphasis on market
  solutions?
• Can other tropical countries emulate Hong Kong or
  Singapore to advance on the path to economic
  convergence? How?