New York Times Magazine – 15 May 2011 – Graphic by CÉSAR A. HIDALGO and ALEX SIMOES
These diagrams are the early fruits of a new approach to the most important unsolved problem of the last century: how to make a rich country out of a poor one. Development economists have many theories about how the trick is done but few proven answers. A compelling solution would be useful closer to home, too: understanding the process of economic development would help us work out whether it matters that service jobs are replacing manufacturing ones or whether there is anything the government can and should do to stimulate new industries like biotechnology or green energy.
Strip away the mathematical language of economists, and conventional theories of economic growth are rather crude. Economies produce “stuff,” and if you want more stuff to come out of the process, put more stuff in (like human capital, say). Yet economies do not produce stuff so much as billions of distinct types of goods — perhaps 10 billion, according to Eric Beinhocker of the McKinsey Global Institute — ranging from size 34 dark stonewash bootcut jeans to beauty therapies involving avocado. The difference between China’s economy and that of the United States is not simply that China’s is smaller; it has a different structure entirely…
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