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China: The Morphing Dragon

Otaviano Canuto's picture

The Chinese economy has changed dramatically over the last three decades. While its per-capita income was only a third of that of Sub-Saharan Africa in 1978, it has now reached an upper-middle income status, lifting more than half a billion people out of poverty. The numbers are dramatic: per capita income has doubled for more than a billion people in just 12 years. What was once a primarily rural, agricultural economy has been transformed into an increasingly urban and diversified economic structure, with decentralization and market-based relations rising relative to the traditional government driven command-based economy.

Growing after the Crisis: Boosting Productivity in Developing Countries

Otaviano Canuto's picture

Spring in DC draws more than just tourists. Last week, government officials, policy makers, civil society representatives and other thought leaders converged to take stock of the global economy during the IMF-World Bank spring meetings. The tone in the hallways was optimistic, but cautious. Growth in advanced economies still remains tepid, weighed down by lingering effects of the global financial crisis, demographic challenges, as well as weakening innovation and productivity growth.  At the same time, there are encouraging signs that developing countries are in good shape, thanks to fiscal buffers that helped them to weather the storm.

Nevertheless, we must be mindful of the work ahead: the IMF warned of a ‘3-speed recovery’, where emerging markets are growing rapidly, the United States is recovering faster than most other advanced industrial countries, but Europe continues to struggle. Where does this leave developing countries? At a meeting with the G24 – a group of developing countries - I had the privilege of discussing the prospects for growth, and policies needed to achieve productivity growth essential for eliminating extreme poverty and for creating shared prosperity.

The Day After Tomorrow: If You Want To Grow, Learn

Otaviano Canuto's picture

Why is it that some countries are more developed than others? A country is “less developed” not only because it lack inputs (labor and capital) but because it uses them less efficiently. In fact, inputs are estimated to account for less than half of the differences in per capita income across nations. The rest is due to the inability to acquire, adopt and adapt better technologies to raise productivity. As an engine of growth, the potential of technological learning is huge—and largely untapped. Four global trends have begun to unlock that potential, and are bound to continue.

First, the vertical decomposition of production across frontiers allows less-advanced countries to insert themselves in supply chains by initially specializing in

The Power of Innovation - free Webinar TODAY at 3PM EST

Ihssane Loudiyi's picture

Join Aleem Walji, formerly of, now the Practice Manager of WBI’s Innovation Team and one of the lead authors for a webinar to mark the launch of a special issue of Development Outreach magazine on “The Power of Innovation.”

Internal Ventures of the Post-Washington Consensus: “Only Connect”

Yevgeny Kuznetsov's picture

The post-Washington Consensus has emerged recently as an umbrella denoting the search for pragmatic and context-specific solutions to problems of developing countries. The recent financial crisis, with its epicenter in the rich economies, has demonstrated that the whole world, not just poor countries, is developing. One feature of the new pragmatism is that industrial policy is back. But in contrast to import substitution, it is an open economy industrial policy – the objective is to increase economic openness: enhance flows of knowledge, foster productive innovation, and promote non-traditional exports. Under rubrics such as productive development policies or innovation strategies, governments in developing countries are providing public inputs, each customized and bundled to suit the needs of particular domains of economic activity, but not others.

How are we responding? One way to understand the World Bank’s role in articulating the post-Washington consensus is to imagine a pyramid. At the top are the ‘thinkers’ of DEC, the Bank’s research and data arm. There are encouraging discussions on new structural economics (Justin Lin), empirical work on new trade theory, and – as one would expect – a new open industrial policy. At the foundation are task managers of lending operations. By being responsive to the needs of the client, but without much fanfare, they are in the forefront of the post-Washington consensus in their dialogue with our most sophisticated and demanding clients such as India, China, Argentina, Mexico, Russia, Malaysia or Chile. A new generation of lending technology and innovation operations is quietly emerging which emphasizes selectivity and focus on a few domains and sectors of the economy deemed strategic rather than the across-the-board focus on innovation climate. Practitioners take the need to make ‘’strategic bets” for granted (‘’the entry costs are high, technology is changing rapidly, one can’t do everything, we need to be selective”), so the issue here is to design private-public institutions to share risks and minimize state capture. New institutions of open industrial policy are being self-discovered on a daily basis, yet there is too little contact between the new theory (‘thinkers’) and cutting edge practice (‘doers’).

The Service Revolution

Ihssane Loudiyi's picture

by Ejaz Ghani

China and India are both racing ahead economically. But the manner in which they are growing is dramatically different. Whereas China is a formidable exporter of manufactured goods, India has acquired a global reputation for exporting modern services. Indeed, India has leapfrogged over the manufacturing sector, going straight from agriculture into services.

OECD-World Bank Innovation and Growth Book Now Available

Ihssane Loudiyi's picture

Innovation is crucial in long-term economic growth, even more so in the aftermath of the financial and economic crisis. Making innovation-driven growth happen requires action in a wide range of policy areas, from education and science and technology, to product and labor markets and trade. The OECD and the World Bank are joining forces to work more closely on innovation, particularly insofar as this issue is a crucial factor in the success of development policy, notably in middle-income economies.