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Have technology and globalization kicked away the ladder of ‘easy’ development? Dani Rodrik thinks so

Duncan Green's picture

Dani RodrikEconomic transformation is necessary for growth that can lead to poverty reduction. However, economic transformation in low-income countries is changing as recent evidence suggests countries are running out of industrialization options much sooner than once expected. Is this a cause for concern? What does the past, present, and likely future of structural transformation look like? Read on to find out why leading economist Dani Rodrik is pessimistic and what some possible rays of light are. 

Dani Rodrik was in town his week, and I attended a brilliant presentation at ODI. Very exciting. He’s been one of my heroes ever since I joined the aid and development crowd in the late 90s, when he was one of the few high profile economists to be arguing against the liberalizing market-good/state-bad tide on trade, investment and just about everything else. Dani doggedly and brilliantly made the case for the role of the state in intelligent industrial policy. But now he’s feeling pessimistic about the future (one discussant described it as ‘like your local priest losing his faith’).

The gloom arises from his analysis of the causes and consequences of premature industrialization. I blogged about his paper on this a few months ago, but here are some additional thoughts that emerged in the discussion. He’s also happy for you to nick his powerpoint.

Dani identified two fundamental engines of growth. The first is a ‘neoclassical engine’, consisting of a slow accumulation of human capital (eg skills), institutions and other ‘fundamental capabilities’. The second, which he ascribed to Arthur Lewis, is driven by structural differences within national economies – islands of modern, high productivity industry in a sea of traditional low productivity. Countries go through a ‘structural transformation’ when an increasing amount of the economy moves from the traditional to the modern sector, with a resulting leap in productivity leading to the kinds of stellar growth that has characterized take-off countries over the last 60 years.

Simulated Manufacturing Employment SharesManufacturing has been key to that second driver. It is technologically dynamic, with technologies spreading rapidly across the world, allowing poor countries to hitch a ride on stuff invented elsewhere. It has absorbed lots of unskilled labour (unlike mining, for example). And since manufactures are tradable, countries can specialize and produce loads of a particular kind of goods, without flooding the domestic market and driving down prices.

But that very dynamism has produced diminishing returns in terms of growth and (especially) jobs. Countries are hitting a peak of manufacturing jobs earlier and earlier in their development process (see graph). And it could get much worse – just imagine the impact if/when garments, the classic job-creating first rung on the industrialization ladder, shift to automated production in the same way as vehicle production.
 

Quote of the Week: Hélder Pessoa Câmara

Sina Odugbemi's picture

Hélder Câmara“When I give food to the poor, I am considered a saint.  But when I ask why they are poor, I am called a communist."

Hélder Pessoa Câmara, the Catholic Archbishop of Olinda and Recife, Brazil, serving from 1964 to 1985 during the military regime of the country. He was an advocate of liberation theology, and is remembered for the above aphorism.

Quoted in the Financial Times on June 20, 2015, "A rock-star Pope puts his faith in science" by David Gardner

 

You leak, but I brief. Who is the scoundrel?

Sina Odugbemi's picture

Secret meetingJames Callaghan, Labor Party Prime Minister of Great Britain (1976-1979), is reported to have quipped: “You leak, but I brief”. In other words, while the politician that he was addressing leaked official documents to the media (a wrong, probably illegal move) he merely briefed the media. His practice, he was implying, was less blameworthy. The question is: is it?

Leaks of official documents and the leakers involved are in the news a lot these days. Some of these leakers are leaking documents on an epic scale, exploiting the weaknesses of modern electronic document management systems. Documents that in the past you would have had to break into safes in a thousand different locations around the world to access you can now find in a single online repository…if you have the right hacking or document stealing skills. While in the past a leaker would send a single document by mail to the editor of a leading newspaper, now we are getting thousands of pages stolen and shared all at once.

There is a romantic, Hollywood view of the epic leakers, and movies are also being made about them, usually hagiographies. The epic leakers are seen as heroic figures, doughty champions acting in the overall public interest. Perhaps. I have no doubt that there are leakers who are genuine whistle blowers, determined to expose wrong doing by public officials. But one also suspects that some of these leakers are complexly motivated individuals. And some of the epic leakers are egomaniacs who fancy themselves as world-historic figures.

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

How the pace of technological progress is redrawing the political map
PhysOrg
From power stations to factories, thermostats to smartphones, information to entertainment, the world is driven—and controlled—by digital technology. So it's no surprise that political and economic success, for businesses and nations, depends on how current they are with advances in technology. That's why Bhaskar Chakravorti and colleagues at the Fletcher School have created the Digital Evolution Index, a first-of-its-kind map of how, where and at what speed the use of digital technologies is spreading across the globe.

Global MPI 2015: Key findings
Oxford Poverty & Human Development Initiative
The Global Multidimensional Poverty Index (MPI) provides a range of resources. The Global MPI was updated in June 2015 and now covers 101 countries in total, which are home to 75 per cent of the world’s population, or 5.2 billion people. Of this proportion, 30 per cent of people (1.6 billion) are identified as multidimensionally poor. In June 2015, our analysis of global multidimensional poverty span a number of topics, such as destitution, regional and sub-national variations in poverty, the composition of poverty.

What happens when historians and campaigners spend a day together discussing how change happens?

Duncan Green's picture

woman offers a flower as a symbol of peace to a Military Police OfficerDuncan Green provides a series of lightbulb moments from a recent conference bringing together historians and campaigners.

Part of the feedback on last month’s post calling for a ‘lessons of history’ programme was, inevitably, that someone is already doing it. So last week I headed off to Kings College, London for a mind expanding conference on ‘Why Change Happens: What we Can Learn from the Past’. The organizers were the History and Policy network and Friends of the Earth, as part of its excellent ‘Big Ideas’ project (why haven’t the development NGOs got anything similar?) About 70 people, a mix of historians and campaigners. Great idea.

The agenda (12 UK-focussed historical case studies on everything from resistance to the industrialization of farming post World War 2 to municipal activism in Victorian Britain to why England (though not Scotland and Ireland) hasn’t had a famine since the 16th Century) was great, as was the format (panels, followed by table discussions, no Q&A).

5 things you should know about governance as a proposed sustainable development goal

Vinay Bhargava's picture

South Sudanese prepare for independenceVinay Bhargava, the chief technical adviser and a board member at Partnership for Transparency Fund, provides five takeaways on governance and development interactions from a recent panel discussion hosted by the 1818 Society.

On May 27, I had the pleasure of serving as a panelist at an event organized by the Governance Thematic Group of 1818 Society of the World Bank Group (WBG) Alumni.

The panelists were: Mr. Homi Kharas, Senior Fellow and Deputy Director for the Global Economy and Development program at the Brookings Institution; Ms. Heike Gramckow, Acting Practice Manager, Rule of Law and Access to Justice at the Governance Global Practice at the World Bank Group; Mr. Brian Levy, Professor of the Practice, School of Advanced International Studies (SAIS), Johns Hopkins University; Mr. Jerome Sauvage, Deputy head of UN Office in Washington DC. Mr. Fredrick Temple, currently Adviser at the Partnership for Transparency Fund, moderated the workshop. 
 
The panel presentations and discussion were hugely informative and insightful. I am pleased to share with you my five takeaways that anyone interested in governance and development interactions ought to know.

How does Gender change the way we think about Power?

Duncan Green's picture

One Billion Rising-Delhi-14 Feb 2013The importance of gender to 'Thinking and Working Politically' is often overlooked, as are power and politics in gender discussions. Duncan Green reviews a concept brief from Developmental Leadership Program on the links between gender and power.

I can’t attend the next get together of the Thinking and Working Politically network in Bangkok next month because of a prior commitment to speak at DFID’s East Kilbride office (ah, the glamour of the aid biz….). Apart from missing out on the Thai food, it’s also a shame because they are focusing on an area I’ve previously moaned about – the absence of gender from a lot of the TWP/Doing Development Differently discussions.

Ahead of Bangkok, some of the participants have fired some useful preemptive shots. Tomorrow I’ll review an ODI survey on aid programmes promoting women’s leadership. Today it’s the turn of the Developmental Leadership Program, which has just published an interesting, if tantalizing, six-page ‘concept brief’ on Gender and Power by Diana Koester.

Koester argues that a gender lens can add a lot to the TWP’s analysis, but also vice versa – we need more thinking about power and politics in gender discussions. Some excerpts:

"Donors have largely neglected ‘gender’ in their efforts to understand power relations in partner countries. In particular they are often blind to the ways in which power and politics in the ‘private’ sphere shape power relations at all levels of society; the ways in which gender hierarchies mark wider economic, political and social structures and institutions; and the opportunities for peace and prosperity emanating from feminized sources of power. By addressing these blindspots, a focus on gender can significantly enhance donors’ insights into power dynamics and their ability to ‘think and work politically’ overall.’

This paper "addresses three main questions: What is power and how can a gender perspective help us understand it? What is gender and how can a power perspective help us understand it? What policy and operational messages follow from a focus on gender and power?"
 

Quote of the Week: Jacob Zuma

Sina Odugbemi's picture

President Jacob Zuma pays a special visit to Former President Nelson Mandela on eve of 2011 Government Local Elections"People tend to try to find something to talk about Zuma. My surname is very nice and simple. Very simple, so they like pronouncing it all the time. So what's the problem?"

-Jacob Zuma, president of South of Africa, on why his name continues to appear in the South African press. 

His administration has experienced a series of scandals that have put his reputation and that of his ruling African National Congress party under scrutiny.

Quote of the Week: Janan Ganesh

Sina Odugbemi's picture

Flags fly in front of United Nations Headquarters in New York City"All zones of public discourse have their excesses and irrationalities, but none like foreign policy. In our golden age of data, this is one area that remains resiliently unmeasurable. So anyone can say anything as long as they say it sonorously and use the word “strategy” a lot."
 
- Janan Ganesh, a political columnist for the Financial Times. Previously, he was a political correspondent for The Economist. He appears weekly on BBC1's Sunday Politics television show and wrote a biography of George Osborne, the UK chancellor.
 

What would persuade the aid business to ‘think and work politically’?

Duncan Green's picture

Women attend a community meeting in IndiaSome wonks from the ‘thinking and working politically’ (TWP) network discussed its influencing strategy last week.

There were some people with proper jobs there, who demanded Chatham House Rules, which happily means I don’t have to remember who said what (or credit anyone).

The discussion was interesting because it covered ground relevant to almost anyone trying to shift an internal consensus (in this case towards aid donors taking more account of politics, power, institutions etc in their work). Some highlights:

Who are your target groups? The ‘aid industry’ or ‘governments’ is far too wide. The best effort identified four: in the rich countries, professional advisers within donors and relevant academic networks; in the developing country, politicians and senior officials.

Within those target groups, there are ‘natural allies’, who entirely understand the importance of thinking in terms of locally specific politics, incentives, institutions etc rather than checklists of best practice. Interestingly, they may not be obvious – diplomats and foreign office types ‘get’ this much more easily than their more econo-technocratic aid ministry counterparts. Sectoral specialists in health and sanitation have done a lot of thinking on systems, but (reportedly) education and water engineers  less so.

The next question is ‘what persuades your targets?’ My bet would be that the most important factor is the messenger, not the message – if a senior politician hears about TWP thinking from their university professor, or a retired political heavyweight, they are far more likely to listen. So perhaps we should deliberately recruit a lot of ‘old men in a hurry’ – apologies for gender bias there, Mary Robinson and Graca Machel are great counterexamples – retired big cheeses keen to make a difference.

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