Thursday, 17 September 2015

Science Is The Missing Currency

As has often been said on here, the key drivers in the increase in prosperity and the mass reduction in poverty throughout the decades are the free market, increased trade opportunities, increased scientific and technology advancements and increased population. That is to say, you’ll find a causal relationship between each of these things and to what extent a country is able to prosper from them.

Increased population is hugely beneficial in being conducive to progress, except for in countries that don't have an abundance of the other qualities (I explained that in great detail in this blog post). And the nations that enjoy a healthy, competitive free market and abundant trade opportunities have a long history of being the ones that advanced first, and continue to prosper. However, much of that is commensurate with their scientific and technological advancements too – and this is not often considered as much as it needs to be, as a healthy market requires a healthy scientific development to propel its growth.

The key point here is that in a world in which a global market is pretty well established for most countries, the developing countries' progression race is likely to be decided in no small part by how scientific the country is - particularly in terms of money put into research, and the extent to which that research can bring them into closer competition with the bigger players in the global market.

The primary European nations (England, Scotland, Germany, France and the Netherlands) that dominated the market for trade in the late 19th century were also all the biggest players in terms of scientific endeavours too (joined by America shortly after). They remained the nations that lead the way in the global market, and were later joined by the likes of Norway, Switzerland, New Zealand, Canada, Sweden, Australia, Denmark, Belgium and Finland. Excluding China, which is an exception all of its own, the other recently developed countries that have the biggest edge on the developing world nations are the smaller countries like Japan, South Korea, Hong Kong, Israel and Singapore, which, unlike India, Brazil and Russia (prior to its own internal problems) are able to advance scientifically with a great degree of rapidity, and become big players in the global market without having a large proportion of the population still at the subsistence level.

The upshot is, we know full well that the free market, open trade, a stable government, rule of law and property rights are all key drivers in the increased prosperity and well-being of a nation’s citizens – and history has repeatedly shown that a lack of these things retards progression. It’s quite understandable why: a nation with internal civil conflict, threats of crime and social instability and a corrupt government (as well as geographical disadvantages like being landlocked) is going to find that trade is hindered by these things. You’re less likely to have a country of innovators if there is widespread fear that there is little protection from the state, or strife and unrest among your fellow citizens, or difficulty in imports and exports due to conflict.

But what’s not considered anything like enough is that a key vehicle for a nation's progression is a healthy scientific apparatus, including prodigious scientific investment in training and infrastructure. Having a growing scientific program doesn't guarantee a nation's progression, but not having one pretty much guarantees that the nation in question won't grow very fast until it acquires one.

But even though all that is true, the picture of the changing world in terms of free market progress and scientific global development is pretty astonishing, as this chart shows:
Here's what it shows. In the 19th century, extreme poverty — defined here as living on less than $1.25 a day — was the pretty much the norm (and yes, this is adjusted for different purchasing power in different countries). In 1820, 94.4% of humans were below that line. Only a small fraction of the world enjoyed standards of living that were not terribly hard. So progress was initially a snail's pace, and by 1910 the share had only been reduced down to 82.4% — a 12 point drop over 90 years. But things picked up after the Second World War, and 89 years after 1910, only 28.9% of people were in extreme poverty. That is to say, from 1820 to 1910 there was just a 12 point drop, whereas from 1910 to 1999 there was more than a 53 point drop. In 2011, the most recent year represented in the chart, the extreme poverty rate had been cut to half its 1999 level: 14.4%

Regular readers will know that I've written before about the extent to which the free market and competition has been one of the primary drivers of the progression-explosion humans have seen in the past 200 years (see for example here, here, here, here, and here). This is the first time I have conveyed so much of an emphasis on nations' scientific progress as an accompaniment to the free market. They are natural bedfellows.

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