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How Developing Countries Can Get Rich Slow

September 5, 2017

Sometimes, it's tempting to run before you can walk. And to get rich quick, some poor countries decide to make big leaps into new industries. The idea: skip some of the parts of regular development, and compete with more developed nations sooner rather than later.

But as New Scientist points out, that often fails because supply chains—whether they be for power, labor, raw materials, or something else—in poorer countries can be too chaotic to support jumps in technological complexity. Power outages happen. Workers don't show up. Parts get stolen.

And when things go wrong, it's easier to revert to old ways than fix the problems. Describing a new analysis in Nature Human Behaviour, researchers from Columbia University call this a poverty trap, in which "agents adapt to frequent disruptions by producing simpler, less valuable goods, yet disruptions persist."

Their research suggests that so-called buffers to disruption—like stockpiles of parts or sufficient emergency power generation capacity—are critical for an economy gradually evolving from, say, farming to manufacturing. Those buffers grow and shrink as a particular industrial push advances, and then the supply chains get a chance to catch up.

The finding, the team suggests, helps explain "why ‘big push’ policies can fail and ... underscores the importance of reliability and gradual increases in technological complexity." To that point, this MIT Technology Review interview does a wonderful job of explaining how light-touch technological interventions can often have some of the biggest impacts on poorer countries.

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