Anand Krishna Shankar (aks409) Global Persp Enterprise Sys, ECON-GB.2190.

W3, Winter 2012

(1) What surprises you about the economic development of the UK and Germany? Solution - The article on the Growth Diamond emphasizes that sustainable development is not merely driven by economic rules but by underlying political systems which form the base of the diamond. UK and Germany developed contrasting growth diamonds owing to differences in their culture and bureaucratic arrangements. The United Kingdom is credited as the initiator of the Industrial Revolution and it enjoyed some first mover advantages. The political system in the UK enabled firms to pursue their self interests and lowered the barriers to trade. These pro-growth policies supplemented with anti-slavery legislation and free trade laws created new order world markets in commodities, labor and more importantly Finance. The surprising aspect in the economic history of the UK was its inability to capitalize on this early start despite the availability of a relatively stable political atmosphere and resources at its disposal. One of the reasons suggested in the article is that, from the beginning the UK adopted an international outlook. Unlike Germany, US and Japan UK perhaps took the concept of entrepreneurship and international trade a bit too far and failed to look inwards which disrupted its domestic orientation. The dependency on exports and imports left them highly vulnerable to shocks in the economy thereby raising questions if their diamond was out of order. On the other hand, German industrialization rested on their strong educational system and expertise in technical areas. They were pioneers in high precision manufacturing and their governments adopted a stable growth approach by reaping the benefits of trade yet safeguarding national interests at the same time. However the World Wars, Nazi invasion and a hyperinflation afflicted severe damage on the German economy leaving it in complete disarray. The German recovery following this period is the most surprising aspect of their economic development as they had to make strong decisions such as raising price controls and strong legislations under extreme distress. As can be seen with the example of Japan which was also in shambles in the post World War II period, the German comeback is no mean achievement and further exemplifies the robustness and resilience of their growth diamond.