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Capital vs. technology

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Wheylous posted on Sat, Mar 31 2012 5:05 PM

I was recently reading an article about employment in India, and it mentioned the fact developing countries have access to all the technological knowledge, but are missing the capital.

 
This appears to tie in to an idea I’ve heard before: that the Industrial Revolution wasn’t a miracle of technology but one of capitalism. This idea about developing countries appears to have a strong relevance – all the technology could be had (because it’s already been invented), but the capital isn’t yet in the country. This is proof that it’s not (just) technology that drives improvement in countries, but capitalism and the attraction of capital.
 
Thoughts?
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Sounds pretty good to me.

 

 

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a wise man once told me that tech is the root of all evil. Those Indians should go back to growing rice or something

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Or dig with spoons.

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@Wheylous: Yes but.

I think the single most valuable piece of capital equipment is the human being. That doesn't mean that every human on the planet should be a Bill Gates but I think it does mean that the obviously political divisions of capital in the world are not simply the result of historical lags and leads in capitalism-friendliness. I think that we can become myopically focused on certain aspects of capitalism that we take as Shibboleths of popular adoption of capitalist theory - for example, the existence of a stock market. But the real essence of capitalism is market choice - even in law, security, finance, and so on. So, in all the most important lines of production, we (the West) are as anti-capitalist as any place on Earth. And in many other areas you might care to point to (e.g. drug laws), we are much less pro-capitalist than many other countries.

As far as explaining why wealth doesn't move more evenly across borders, I think that prostitution and polygamy are good examples to see how natural wealth redistribution mechanisms that are not politically useful are suppressed. Wealthy men in the West would probably be willing to have multiple wives if the law permitted it. And they are less likely to find females in the wealthy country where they come from willing to engage in such arrangements. Hence, if polygamy were legal in Western countries, you'd probably see a rash of wealthy men picking up 2nd and 3rd wives out of Malaysia or India or wherever. That would disburse a considerable amount of Western wealth into poorer countries as the bride-prices would definitely rise. A similar story can be told for prostitution.

I don't think the Powers that Be restrict these activities because they have some moral objection to them. Rather, it's not politically useful to permit them. What is politically useful is creating barriers to the exit of hostage capital to "encourage" such wealthy men to engage in domestic investment which can be taxed.

I think too much is made of the benighted policies of many foreign countries. While they lack certain basic economic freedoms we (think we) have here, they also have other basic economic freedoms that we don't (generally, it's easier to do under-the-table work and black-market trade in so-called "developing" countries).

Translated to the issue of labor versus capital, I think that there is a lot less talent-searching than there would be if there was less regulation of labor. It's a toss-up in my mind which is more heavily regulated: labor or the interest rate. One of the stated objectives of all that labor regulation is to curb employers from looking overseas for laborers (despite insane tax policies that are driving them out). Because of the large capital value of the human being, I think that profit-driven companies would be doing a lot more "head-hunting" and talent-searching than is currently done. Just like my illustration of wealthy Western men buying up 2nd and 3rd wives if polygamy were legalized, if labor regulations were removed or drastically reduced, we'd probably see a lot more head-hunting for kids with "raw talent" to be turned into the next generation of brain surgeons, and so on.

Clayton -

http://voluntaryistreader.wordpress.com
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One gedankenexperiment I find useful for demonstrating the role of capital vs. technology is colonization. Depending on your goal, you may use some historical colonization (e.g., the New World) or some fictional (e.g., how much time would colonists on an Earth-like planet need to reach the current quality of life even given all the know-how of the world, if they start bare-handed? with a lot of steel tools? with a complete tool-manufacturing plant?).

The Voluntaryist Reader - read, comment, post your own.
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xahrx replied on Mon, Apr 2 2012 1:10 PM

I forget the economist who did the comparrison, but this is one of the reasons why foreigners with substantial savings still can't break out of poverty in other countries, but when they come to the US or other countries where it's easier to mobilize financial capital, all of a sudden they're prospering entrepreneurs with one or more stores under their belt.

"I was just in the bathroom getting ready to leave the house, if you must know, and a sudden wave of admiration for the cotton swab came over me." - Anonymous
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There was someone that sort of refuted the idea that "countries have access to all the technological knowledge" in a book about the history of research funding and the type of research done by states vs. private business.

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Just saw this today. She makes your case in the latter half of the video:

If I had a cake and ate it, it can be concluded that I do not have it anymore. HHH

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Wheylous do you remember where you heard this?  Reading it again seems to have sparked something and I'm wondering if I hadn't heard it before this thread as well.

 

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This article goes into it a bit.

What prevents a country like India from adopting the American methods of industry is the paucity of its supply of capital goods. As the Indian government's confiscatory policies are deterring foreign capitalists from investing in India and as its prosocialist bigotry sabotages domestic accumulation of capital, their country depends on the alms that Western nations are giving to it.

 

 

If I had a cake and ate it, it can be concluded that I do not have it anymore. HHH

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I don't think that this is where I read it, but it appears that this might be a bit related:

What prevents a country like India from adopting the American methods of industry is the paucity of its supply of capital goods.

http://mises.org/efandi/ch4.asp

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ThatOldGuy:
This article goes into it a bit.

"What prevents a country like India from adopting the American methods of industry is the paucity of its supply of capital goods. [...]"

Wheylous:
I don't think that this is where I read it, but it appears that this might be a bit related:

"What prevents a country like India from adopting the American methods of industry is the paucity of its supply of capital goods."

http://mises.org/efandi/ch4.asp

 

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Whatever

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