In a new short paper, Ha-Joon Chang argues that the current approach to "development" pioneered by the UN, World Bank and the western donor community is unable to promote development, and is probably anti-developmental, because it ignores a critical component of development - transformational of productive capacities. Excerpt :
By discussing these examples of countries defying the market and entering activities where they do not have comparative advantage, I do not mean that all forms of ‘traditional’ activities, such as agriculture or textile/clothing, are incompatible with development. After all, the Netherlands is still the world’s third largest exporter of agriculture despite not having much land (it has the fifth highest population density in the world, excluding city states or island states with territories less than, and including, that of Hong Kong). For another example, Germany used to be the world’s fifth largest exporter of textiles and clothing until as late as the early 1990s. However, these were possible only because these countries applied advanced technologies to these ‘traditional’ activities and upgraded them – hydroponic culture in the case of Dutch agriculture and specialty textiles and high-class design in the case of German textile/clothing. At the other extreme, countries like the Philippines export a lot of high-tech products, like electronics, but no one calls it developed because the production uses someone else’s technologies, is organized by someone else, and has few roots in the domestic economy. Should all the multinational companies decide to leave the Philippines tomorrow, it will be reduced to exporting primary commodities.In short, there's no short cut to development. The "process" of how one gets there is important. This naturally calls for a pro-active involvement by the State in channelling the energies of private actors to foster the transformational exercise. Markets alone wont get you there :
Once again, these examples confirm my earlier point that it is not what one has but how one has got it that determines whether a country is developed or not. Without any vision of transformation in productive structure and the upgrading of the productive capabilities that make it possible, the vision of development behind the MDGs can only be described as ‘development without development’.
The emphasis on individual capabilities and entrepreneurial energy that dominates today’s mainstream development discourse is largely misplaced. To put my argument above somewhat differently, what really distinguish the US or Germany, on the one hand, and the Philippines or Nigeria, on the other hand, are their Boeings and Volkswagens, and not their economists or medical doctors (which the latter countries have in quite large quantities). Similarly, what really distinguishes Ecuador or Vietnam from the US or Japan is not the raw entrepreneurial energy of the people that the neo-liberals so often talk about(which you probably have more in the former group of countries) but the abilities of a society to set up and manage productive enterprises that can channel that individual energy into raising productivity.Previous discussions on Ha Joon Chang here, here and here.
What little developmentalism that there is in the currently dominant vision of development is ersatz developmentalism – the belief that, if you educate them better and make them healthier and give them security of property rights, rational self-seeking individuals will exercise their natural tendency to ‘truck and barter’ and somehow create a prosperous economy. However, this vision is fundamentally at odds with the reality of development. In reality, development requires a lot of collective and systematic efforts at acquiring and accumulating better productive knowledge through the construction of better organizations, the cross-fertilization of ideas within it, and the channeling of individual entrepreneurial energy into collective entrepreneurship.