Shrimp might seem a fairly small example of how economies grow. But given that we've got this example before us, in this very newspaper, of how shrimp farming is making the Bangladeshi economy grow, why not use it?
The background is that tiger shrimp (what some might call “black” tiger prawns) are something -- perhaps some things -- that grow well in Bangladesh. But it's possible to do this in better and worse ways. The SAFETI project, backed by the USDA, with participation from the DoF -- and many other interesting acronyms -- has been telling shrimp farmers how to do this better. Excellent. That this is some alphabet soup of government passing on this information isn't the point here. Even the most vicious of free marketeers like myself are just fine with the government educating people.
Rather, this -- and myriad little improvements like this across the country -- is how economies grow. All too many of us, politicians especially, fall into the trap of thinking that growth comes from big projects. Shiny new tech and bleeping computers and vast steel mills and bridges that run for miles. Growth does come from these things, but they're not the growth itself, they're merely ways of getting to it. Growth is simply doing things better. Gaining more output from the same inputs, adding more value.
That is what economic growth actually is.
Growing shrimp better is, however small an example it is, economic growth just as much as building a new steel mill is. In fact, given how badly politics has been known to build steel mills, perhaps more so. For that gross domestic product thing, it's the value added. It's the difference between the value of the output as compared to the inputs necessary to make it.
Now, I have to admit that as a city boy, born and bred, I don't know much about shrimp. Do you have to milk them twice a day like cows? Or are they like turnips, throw them in a hole and come back six months later for the harvest? Fortunately, I don't have to know that -- but I do know about that thing from Adam Smith, the specialization and division of labour.
But it is possible to see the effects of this greater knowledge here. Output went from 295kg of shrimp per hectare of land to 664kg. We're producing more shrimp on the same land, or, we could produce the same shrimp on less land. We have become more efficient, we have more value being added to that most limited of resources: Land.
That value goes somewhere, some of it to the farmers of course -- incomes per farmer rose from $918 to $2,044. Also, of course, someone, somewhere, has been able to eat 369kg more of prawns in a bhuna, vindaloo or whatever other sauce is desired -- perhaps even a cocktail. We have value added, the economy has grown. We have more value added, we've become more efficient at using the scarce resources we have as inputs and have created more value in those outputs.
There are two major points to take away from this. One is that this is just how economies grow -- we get better, inch by inch, at doing each and every thing. We get better at growing lentils, the economy grows, we cut cloth for clothes better, the economy grows. The grand plans for vast machine plants aren't the definition of economic growth at all. They might be the way that we achieve that greater efficiency, that is true. But an economy contains a myriad of things being done and adding value -- becoming more efficient at them -- to any of those small, shrimpy things is still economic growth.
The second is that, yes, this is an offshoot of government action. This specific example is, at least. But we've got to be very careful about making the next leap. Here the growth is because the government has not, in fact, told people what to do. Instead the government has educated us about a way to do this one thing. So, those who make that leap that should not be made, who say that this proves that government planning of the economy is the way to go, are still wrong.
That is, the government disseminating information about clever ways to do something is an excellent way to increase growth. The government telling people what to do -- rather than merely informing -- isn't.
The proof I would offer of this is that I am not part of the government of my native Britain. But I have influenced that government through my work and am from much the same sort of background and education of those who do the actual governing. Now, me, city boy that I am, unsure about whether you milk turnips or harvest cows -- should I be telling farmers what to do? No, obviously not -- but aiding in farmers learning world best practices, why not?
The government has a role in education, certainly, but the government shouldn't be planning how people do things. On the very basic grounds that those who govern tend not to know how to do anything.
Tim Worstall is a senior fellow at the Adam Smith Institute in London