Beyond manufacturing export-led growth
Success in development over the past half century was greater than anyone anticipated, seen starkly in the contrast between Myrdal’s predictions for Asia just fifty years ago with what happened. Our understanding of development has changed: There is an enormous gap in knowledge as well as in resources that has to be closed. In all sectors, there are huge disparities in productivities within countries, matching those between countries. Most of the advanced countries are engaged in service sector—80% or more—so if there are disparities in standards of living, it relates especially to productivity in these service sectors.
The basis of the success of growth over the past half century was manufacturing export-led growth. But manufacturing won’t play the same role in the coming decades that it has played in the past, simply because the share of global employment in manufacturing will be declining. The increase globally in manufacturing employment won’t suffice to meet the needs for new jobs, especially in Africa with its burgeoning population. It won’t be able to do so in the future to anything like the extent that it did so in the past. There has to be another strategy—one that performs some of the essential roles that manufacturing export-led development did over the past half century.
In this lecture, I deconstruct what enabled manufacturing to provide the growth that it did in the past—how it facilitated structural transformation. It provided needed foreign exchange, promoting learning, and provided employment all at the same time. Successful development policy will need to be explicitly more multi-pronged, addressing separate “challenges” that the manufacturing sector addressed simultaneously.
We show how a coordinated multi-sector strategy has the prospect of attaining the same success of the old manufacturing export-led strategy.
The concept of the development state, with development policies such as modern “industrial policies,” and development institutions, such as development banks, will continue to be central, but will have to be redefined in response to these ongoing changes. Government will need to play an important role in the new structural transformation towards a modern economy—which will not in general be a manufacturing economy but a modern services economy; and in Africa’s next phase of development modern agriculture will also be vital. For those countries lucky enough to have a rich endowment of resources, successful development can rest on a strong natural resource base, but with the right policies, what has seen to be a problem—sometimes called the “natural resource curse”—can be converted into a blessing.
In advancing these new development strategies will require greater balance between the market, the state, and the community, a perspective articulated in the Stockholm Statement.