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Richard Kozul-Wright
Manufacturing Success: Structural transformation, industrial policy
and the rise of the South
Geneva, 15 April 2011
Structural transformation
• Economic development requires structural transformation – new activities + shifting resources:– Source of productivity growth (Lewis)– Virtuous supply and demand side linkages
(Kaldor)– Learning economies (Schumpeter)
• Is industry special? Yes and no• Structural transformation more important to
developing than developed countries – large productivity gaps between different parts of their economy
What you (produce and) export matters
Why countries trade:Comparative advantage (static)Technology/learning (dynamic)Vent for surplusBalance of payments
Sophistication (diversification) some traded goods are associated with higher productivity levels than others and countries that latch on to higher productivity goods perform better.
Missing links
• Export-led growth vs import substitution
• Misreading the East Asian Miracle investment-export nexus
• Big firms export and invest
• Public investment matters
The role of production networksFDIFlying geese paradigmRegional arrangements
A new industrial policy?
Concerns:Trading more earning lessFootloseRace to the bottom
New patterns of trade and investment
The Rise of the South
The emergence of southern growth poles
Catching up, convergence and decoupling
The crisis has accelerated the shift
Can the South go it alone? Markets, machines and money
Contribution to world GDP/PPP growth 1990-2015Annual global GDP-PPP growth rate (based on 3-yr moving average)
0%
1%
2%
3%
4%
5%
6%
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Contribution of advanced economiesContribution of emerging and developing economies
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on IMF World Economic Outlook, 2010, April
Notes: Data for 2010-2015 based on IMF projections
(back)
Catching Up?
Long run GDP trend
0
10
20
30
40
50
60
70
80
Year
% o
f g
lob
al
GD
P
High Income Low and middle Income
Developing Economies no Longer Perceived as High risk/Low return
0%
20%
40%
60%
80%
100%
120%
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Advanced economies Emerging and developing economies
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on IMF World Economic Outlook, 2010, April
Public Debt as % of GDP
Evolution of south south trade
0%
10%
20%
30%
40%
50%
60%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
South-South trade as % of south total South-South trade as % of world total
South-South trade by regionin 2009
Source: ECIDC,UNCTAD based on UNCTADstat.
AfricaLAC
Asia
0
200000000
400000000
600000000
800000000
1000000000
1200000000
1400000000
1600000000
1800000000
2000000000
Africa
LAC
Asia
Oceania
Exporter
Recip
ient
Policy challenges
• Avoid North South asymmetriesTerms of tradeBalance of paymentsEnclaves
• Exploit diversification opportunities
• Financing adjustment and upgrading
Why Industrial policies matter even more?
Risks in South-South for least developed (polarization and commodity trap)
The middle-income trap
The limits of export led-growth
Employment creation (inclusive growth)
Financialization: a persistent threat to productive investment
Learning from success: Development states vs good governance
• Domestic resource mobilisationmanaging rents
• Integrating macro, trade and industrial policiesExchange rates
• Disciplining capital (particularly finance)• Capabilities• Social policy