The importance of dispersing inputs and human capital for economic development policy

The dilemma is that poor countries lack the means to connect all places to all inputs. They are faced with the choice of connecting a few places to most inputs and getting high productivity there, or putting some of the inputs in all places and getting very little productivity growth everywhere. That is why development tends to be unequal.” (Redistribution or Inclusion? by Ricardo Hausmann – Project Syndicate)

So how can poorer countries overcome the need to concentrate their resources (“inputs”) in a single or few cities?  This is especially difficult when there is one city or a handful of cities that have historically attracted all of a country’s human capital and inputs.   Through the absence of a clear policy, or by the natural advantages of a single city, these areas maintain their edge.  

The classic example I have used in the past is the role of Buenos Aires in Argentina.  Two earlier articles discuss this: Los flujos migratorios en Argentina y los Estados Unidos and Argentina: Hacia un Desarrollo Territorial con Equidad.

Only the implementation of activist policies or other unplanned disruptions (such as economic or international conflict) will attract human capital and inputs to developing cities and regions within poorer countries.  Inter-regional organizations such as IIRSA and the Banco do Sul (Banco del Sur) help promote the development of economic policies and infrastructure projects that transcend country borders.  

In the case of IIRSA, ten axes cut multiple times across international borders.  See a previous article that mentions IIRSA here.  This helps marginalize the role of megalopolises for inhibiting growth within other parts of the same country.  New infrastructure projects  better connect existing cities while providing a chance that interconnecting regions might develop.  These projects redirect human capital and inputs from concentrated regions towards other less developed regions.

O Banco do Sul (El Banco del Sur) is a monetary fund designed as piece of UNASUR (UNASUL).  Its role is to provide alternative funding for social projects or infrastructure endeavors.  The goal to provide alternative funding to member countries.  O Banco do Sul has funding available solely for member countries and is seen as more appropriate for the development needs of its members.  This is an alternative to the World Bank and International Monetary Fund which were used extensively by many debtor countries in the region.  O Banco do Sul is also the organization that could potentially begin emitting a single currency for South American countries.  This would be similar to the role the European Central Bank in the Eurozone.



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