Learning to Industrialize: From Given Growth to Policy-aided Value Creation

by Ohno; Kenichi

• ISBN13: 9780415595704
• ISBN10: 0415595703
• Format: Hardcover
• Copyright: 2012-10-15
• Publisher: Routledge

Summary

Developing countries are not all alike. Even under similar initial conditions and integration pressure, some rise rapidly to join the rank of advanced nations while others are stuck with poverty. A large number of countries, in Latin America for example, seem to be in the middle income trap, rising only to a moderate level of industrialization but unable to create internal value that would take them to the high income club. Even among the so-called high-performing East Asian economies, Japan, Taiwan and Korea have attained great industrial capability while Malaysia and Thailand still belong to the middle income group. Indonesia, the Philippines and many others have not really caught up with the West at all. Divergent performances reflect different speeds of catching up rather than whether the economy took off early or late. This book argues that growth based on natural resources or geographical advantages will sooner or later hit the wall. To go from middle to high income, a country must install a national mindset and institutions that encourage human capital accumulation. The free market model can take a country only to lower middle income. Beyond that, a strong state which embraces market and globalization, engages in constant policy learning, and establishes effective collaboration with the private sector is a must. The author, who conducts policy dialogue with many developing countries in Asia and Africa, states that such proactive industrial policy is not only possible but already practiced in many parts of the world, especially East Asia. Many examples are given to show how this is done.