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An elusive quest for a recipe for success in economic development

For some decades before the turn of the Millennium, the growth prospects for most of the developing world looked extremely bleak. Income growth was negligible and poverty rates were high and seemed stubbornly persistent. Some even suggested that the barriers against development were almost insurmountable as progress in the already rich world was argued to come about at the expense of the poor. Then in the late 1990s, global economic dynamics changed and the future of the world’s poor seemed brighter.

Africa started to rise from the doldrums, and giant economies, particularly in Asia but also in Latin America, began to challenge the world order as dominated by the industrialized North. Heavyweight commentators such as The Economist and Time Magazine, reporting on the state and trend of the international economy, noted that the South was witnessing a new dawn. The message was that poor countries will catch up because they will always have the advantage that income-generating technologies are readily available and that poor country labour costs are typically lower. If trade is open and macroeconomic and governance fundamentals are sound, then little stands in the way of this advantage being realized. Critics maintain, however, that even if income growth in poor parts of the world occasionally happens, the long-term trend is still depressing as the absolute gap between rich and poor continue to increase. Poor countries cannot catch up. In a sense both understandings might be justified, as we have seen poor countries catching up also in the past, but it has rarely been sustained. The question becomes what to believe, and how to grasp if there are deeper dynamics at play?

In the discussion on how economic development can be achieved, metaphors relating to familiar and easily comprehended situations are sometimes used to structure the thinking about complex processes. One such analogy is to see development as if it were baking. For success you’ll need the right ingredients, adequate tools, and a recipe. Much of the development reason have been following these lines. For example, a country needs capital to develop. If there is not enough available in the country, it can simply be added from outside through, for example, aid. But we also know that you cannot just throw all items in a bowl, stir, and hope for the best. The recipe gives codified instructions of proportions, efforts, and sequence. Bakers of all kinds know that the end product seldom looks the same, and definitely not as good as the picture in the cookbook or on the Great British Bake Off. To succeed you need baking capabilities. Experience counts. Still, success is far from guaranteed. What works in one setting does not necessarily work in another.

When baking, different ovens might bake differently, and when developing, different contexts might yield different results. We know that the ability to adjust to both internal and external conditions is highly important. Variation matters. The options are then getting greater, but the drawing of workable lessons is getting thornier. And to make matters even more complicated: what if capabilities are lacking or some ingredients deemed necessary are missing altogether? Maybe the recipe becomes misinterpreted, misleading, or even counterproductive? After all, the lack of some prerequisites might be the fundamental reason why poor countries are poor in the first place.

So, while we certainly know some things about the development process, we are painfully aware of the fact that a universal recipe does not exist. A recipe might still be useful but only to a certain extent. What should a poor country do?

Even if growth locomotives such as China and Brazil show signs of losing steam, possibly affecting other countries adversely, long-term history is not only doom and gloom. Although examples are few, some poor countries have been able to close the development gap, and hundreds of millions of people have been able to escape dire poverty. Arguably, turning to history to gain insight on how development obstacles have been overcome is a potentially feasible approach when facing the question of how to sustain growth in living standards and a reduction in poverty for the least fortunate countries. But the use of history should be inspiring rather than a straight jacket. There is strong empirical support that structural transformation, for instance, the relative decline in the importance of the agricultural sector, is a necessary feature for a sustained rise in human wellbeing. But this might not be sufficient for the development process to gain strength.

To get on with it requires a recipe and a baker that is sensitive to the characteristics and initial conditions of the country destined to catch up. Given the potential gains, to disentangle both the fundamental and particular ingredients needed for success in economic development is a worthwhile endeavour.

Headline image credit: View from the Peak by Shepard4711. CC-BY-SA-2.0 via Flickr

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