Monday, 11 August 2014

Jobs, light manufacturing and structural transformation - a comprehensive package for poverty reduction

The best thing about being a Visiting Fellow (in my case both at IDS and UNU-WIDER) is that you meet people from very different networks. Another good thing is that sometimes you stop “visiting” and get to sit down and record what you have learnt. Today is that day.

I was recently in Vietnam at the UNU-WIDER conference on “Institutional Reforms for Transformation, Inclusion and Sustainability”. Vietnam used to be one of the most aid-dependent countries in the world, but has posted sustained and remarkable growth rate figures, privatised most of its state-owned enterprises, the private sector has got into manufacturing, and the country has significantly reduced poverty rates. Is there a message here? Yes.

In the immortal phrase of The Economist, it is important to “make things you can drop on your foot”.

One of the things I do for UNU-WIDER is interview some of the brilliant conference presenters for their website. It is a crash course in their thinking for me, and an easy way in for viewers. I now want to give you some snapshots of what I learnt on work at the conference.

Think of the “new structural economics” and you think of Justin Yifu Lin, former World Bank Chief Economist. 

In his conference presentation on how to avoid the “middle income trap”, he gave a six-step toolkit for growth identification and facilitation, showing how to spot industries and competitors who are ahead which are “ripe for the taking" - provided a government in the poorer country can remove binding constraints and cash in on latent comparative advantage. He shows how to develop a sensible industrial policy and avoid the traps of the old structuralism, primarily “comparative advantage defying economics”. That sounds bad. It is. It does not fly. It costs money and wastes resources.

Hinh Dinh and colleagues have spent years looking at light manufacturing in great detail – both all over Africa also in China. Certain industries are key to getting industrialisation going – light manufacturing tasks such as clothes, footwear and leather, woodworking, basic metal work, agroprocessing. In short, stuff people need for daily life, shoes, a shirt, a table. If you can make them, you can sell them, and you can eventually move up the value chain in manufacturing. Hinh Dinh’s work is full of detailed case studies. Reading the Africa accounts, you can also learn that cherry tomatoes have more value to growers in West Africa than bigger ones, and the story of Michelle Obama’s “inauguration shoes” – and how Ethiopia (with Chinese investment and know-how) broke into designer footwear. (It also helps to have a lot of cattle in your country. The shoe industry – it’s what you can run if you have the hides.)
Martin Rama gave us a global run-down on jobs based on the huge amount of work put into the 2013 World Development Report. Surprisingly enough, it is only the second time in 35 years that the WDR has focussed on employment. This report is a comprehensive approach to making good that omission.

Gary Fields has spent a lot of time talking to ordinary people in the informal and the formal sectors about their working experience in different parts of the world. This wisdom and experience is distilled in his book Working Hard, Working PoorFields goes back to basics – for him economic development means “improvements in people’s material standards of living”. One of his key messages is that given the extent of informal and self-employment among the poor, rather than wishing it did not exist, ignoring or even repressing informal workers, policy makers should understand their lives, the decisions they have to make and finding policies which help them.

There was much more good work presented – and the outlines by Lin, Hinh Dinh, Fields and Rama can be found among the conference presentations on the website. Of course the real scholars among you will read the entire works – cover to cover – with much benefit! 

By Roger Williamson

Photo of Roger Williamson