Blog
Science and Survival

9 May 2013

Lorraine Telfer-Taivainen and Roger Williamson

Pathways to Industrialization in the Twenty-First Century, (edited by Adam Szirmai, Wim Naudé, and Ludovico Alcorta) a new book with important messages on industrial policy, particularly for successfully developing economies, was launched in mid-April at a packed lecture theatre at the London School of Economics.

Industrial policy used to be a forbidden term at the World Bank, according to Joseph Stiglitz. But a more recent Chief Economist from the Bank, Justin Yifu Lin, in endorsing the book argues, ‘No country has been able to move successfully from a low-income economy to a high-income economy without its government’s pro-active use of industrial policy to facilitate the economic transformation.’

The book can be read alongside UNDP’s 2013 Human Development Report, The Rise of the South. Over 40 countries from the South have done significantly better in improving their human development index between 1990 and 2012 than their previous performance would have suggested (p. 12).

Both of these publications suggest that real progress in development is the result of a wider set of policy approaches than those prescribed by standard orthodoxy. In particular, both in-depth studies suggest that a developmental state requires an active policy on industry and science to help carve out a niche in the globalizing world economy.

What does this imply for Africa?

Is this good news for sub-Saharan Africa? Here opinion among the books’ three editors on the panel at the book launch and among the LSE audience was divided. According to UNIDO, ‘The 1980s and 1990s were marked by a shift of manufacturing production out of Africa. Excluding South Africa, the region’s share of global manufacturing production fell from 0.4 per cent in 1980 to 0.3 per cent in 2005, and its share of world manufactured exports from 0.3 to 0.2 per cent’ (p. 246). Sometimes it is important not to round figures down to whole percentage points! Adam Szirmai stressed impressive growth rates since 2000 in countries such as Rwanda, Ethiopia, Ghana, Mozambique, and Angola. Both industrial and modern agricultural development was necessary and possible. Wim Naudé was more pessimistic: climate change, increasing food prices, the difficulty of competing in the international market, were all formidable obstacles. Young Africans do not want to stay on the farm, but increased food production and moving up the value chain in food processing are essential for industrial and economic development.

Countries do not have to be perfect to achieve impressive results. The UNDP report profiles 18 countries in depth. You just need to get enough of the policy mix right and show strong leadership.

Ghana, Rwanda, and Uganda feature in the UNDP list. Rwanda (tourism, coffee, tea) and Uganda (poverty alleviation through absorbing labour in the cash crops for the export sector)—post-conflict countries with strong, even authoritarian leaders—can be seen as developmental states. Ghana doubled cocoa production per hectare during 1983–2006 and the sector now employs some 700,000 people. Investing in improved agriculture can make a difference (UNDP: 72–77). Rwanda in particular has majored in science and technology, with the renowned Kigali Institute for Science and Technology, an early leader in the field.

Manufacturing remains central

The research presented in London concludes that manufacturing will continue to be important in the twenty-first century, as is the case in Brazil, China, India, and in a great variety of countries in Asia, Latin America, and Africa. There is also a rediscovery of the importance of manufacturing in the advanced service economies. There are many reasons for this. These include the central role played by technological progress, economies of scale and scope, learning and industrial innovation in industrial activities. The importance of the many inter-sectoral linkages in industry is not only crucial in terms of employment, it is also crucial in terms of the development of human capital. Industry is characterized by numerous knowledge spillovers both upstream and downstream in terms of research, skills, and the continuous upgrading of inputs ranging from raw materials and equipment to services. Industry will continue to play a key role in the development of most countries.

What did we learn?

• Manufacturing is important for developing economies, but so are services

• Industrialization is challenging in itself, now coupled with the need for low-carbon growth paths

• Developing countries are being disproportionately affected by climate change; green industrialization and greening of supply chains can help mitigate climate change impacts

• Industrial policy, no matter how robust, can be subject to rent-seeking, political capture, and corruption

• With China estimated to run out of cheap labour in the next decade or two (due to successful population policies) a manufacturing window could open up for Africa

• Infant industries need protection and support but returns must materialize; local niches should be utilized.

It seems that new analyses provide a hopeful message—the obvious next step is spreading the word and brokering honest and sound advice to developing country governments.

Lorraine Telfer-Taivainen is Publications and Information Assistant, UNU-WIDER. Roger Williamson is a Visiting Fellow at the Institute of Development Studies, University of Sussex, UK.

WIDERAngle newsletter
May 2013
ISSN 1238-9544

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