Characterize globalization. A world in which production has been unbundled and it's changed the nature of trade flows.
A world in which high income countries are shifting governance out of multilateral forums into regional and bilateral forums.
And also a world in which we're much more aware of the kind of carbon-based nature of the global economy.
But we also have a number of sort of old perennial challenges, but namely that of kind of commodity price volatility and these long-term business cycles of credit expansion and debt, which we we focused upon in last week's cutting edge lecture.
So you know it's it's a very challenging time to think about industrial policies both in terms of what developing countries can do but also in terms of how the global economy needs to be reformed to make those developmental aspirations more likely to succeed.
So we could not have 2 better guests to help us confront these challenges. First of all, we have Dr.
Arkabee Ochoby, who is the former senior minister and special adviser to the Prime Minister of Ethiopia.
He's currently a British Academy Global Professor at Soaz University where he's working on a new project.
On greening African development. His work has been a big source of inspiration for me personally and for many other scholars, our students will be reading his book this term made in Africa and I really love this book because it both has a lot of very empirically rich case studies of industrial policy in Ethiopia in different sectors, but it's also an example of how you can do very kind of theoretically.
And, and still make it very relevant and helpful for policy makers at the same time. So then we have Dr.
Richard Kozelwright, very relevant and helpful for policymakers at the same time. So then we have Dr.
Richard Kozelwright, who is the director of Ungtads Globalization and Development Strategies Division.
He's been a very inspiring scholar for many people within development studies as well and has been actively involved in multi-lab, multilateral discussions about development.
He's written many books including Transnational Corporations in the Global Economy, a book with a very nice title, The Resistible Rise of Market Fundamentalism, as well as a more recent book The Case for a New Breton Woods which takes a multilateral view of these issues.
I've also noted that both of our speakers have co-edited the Oxford Handbook of Industrial Policy and so I you know I was trying to tell my students this week just how lucky we are to have both of you join us this week.
So I'm going to ask both of you to speak for about 30 min and I've been told to be a little bit strict so I will give you a reminder.
When you have 5 min left and then we're going to open for questions from the students and from other members of the LSE.
So just to start us off, I will share the slides. Have to remember how to. Do this again.
Thank you very much. Laura, do you hear me?
So here we go. And I hand over to you, Yes, we hear you.
Thank you. I'm first honored to to present to distinguished students.
Hate, one of my favorite universities and schools. And have been frequently visiting because the library when I Was dig my PhD.
Source. So thank you, Professor Lavra. Man and, Professor James, for the invitation.
I am also glad that I am presenting with my colleague. And good friend Richard. Whom, we have been working was a similar.
Research area and it will be I think appropriate. To mention that Ankt has been one of the rare incisions.
International organizations. That has been trying to accommodate head products. Views alternative views. On issues linked with developing quoted and on industrialization on thread, on structural transformation.
And, and I would like to express my appreciation for research. Or his distinguished work for over 30 years at So coming back to my, presentation.
I would like to focus on 3 areas. First, to provide some background on. Perspectives link with.
Industrial policy. Secondly, I'll try to highlight few of the building blocks of industrial policy.
And the third area, and quite important will be the challenges as well as the prospectus of of the the current situation.
So the very reasons that I want to touch on the background. link with perspectives is for 2 reasons.
First, So that you understand that the industrial policy literature is so rich and has a very long existence.
And it's important to understand. The backgrounds of context and in the perspectives. I would encourage you to look at the.
Foxport handbook of industrial policy which we co-edited but having this background is also I want you to to be motivated to do some research on industrial policy.
Sorry, want to give you some some flavor of this. So, Laura would be.
Cont. Yeah, helping us with the slides. Thank you Laura yeah these are 2 of the pioneers on industrial policy i'm not referring earlier economies like Adam Smith's or some other of.
Writers and thinkers who partly contributed, but I'm primarily referring where a very comprehensive presentation of industrial policy is available.
So here we see 2. Persons Alexander Hamilton and Frederick Lee. They were during the same period and Frederick's list significant National system of political economy, which is for volume.
And it's quite quite important even with the current situation. Alexandra Hamilton is the first treasury of the United States.
And of course, HIPAA. He died while he was young in his thirties.
But he has been at the one of the most significant contributors not only on industrial policy but also on other issues linked like in the banking, central bank, etc.
So these are quite important and you will find the books quite easily. Next. Yeah, so you could see from here.
A brief, thought industry consisted that true wealth and prosperity of a state, Hamilton, was a strong believer that the US should invest should focus on manufacturing.
And Frederick List Try to justify the importance of productive power, which is industrial capacity. And that the government needs to also to develop this sector.
So you will find this quite interesting. Next. Yeah, Joseph Champter is, one of the economists in the forties, fifties.
And his key contribution has been to show us how technology is the long term. Can drive economic transformation and and social transformation and and one of his key contribution has been the concept of a creative destruction, which is quite useful in the current context.
The new deal is one of the key demonstration how an industrial policy can really transform an economy. So we know in the thirtys after the depression in the thirties that, recovery of the economy was quite important and boosting demand.
Was a was a key. Element that the Roosevelt government focused and and here we need to link it with Kenya's British economist who has really been.
Pushing the idea of the importance of advocate demand. And I want to highlight that the World War 2, this is quite quite important.
To demonstrate how industrial policy can really make significant breakthrough. During World War 2. The major active industrial policy was pursued by the US.
And who? Which we could be considered as a miracle is that within few years the years was able to boost its manufacturing and industrial capacity without that.
It was not possible to defeat. And here during this period, for instance, The manufacturing of aircraft became like just manufacturing.
Cars and vehicles. So, 1979. The US was manufacturing 3,000 aircraft. By 1944.
It's production capacity reached 100,100 times, manufacturing and this was pursued, with, the concepts of industrial policy and also inventions were made during this period.
Pencil in radar jet engine competing earlier ideas of competing with were established during World War 2. Then after all, Ruart chose a space mission and then Boeing became a global leader in manufacturing of aircraft's then in aerospace.
Space mission NASA. So in the forties and fifties the proactive industrial policy of the US is quite live and and it's a key demonstration that industrial policy has always been.
The main focus of advanced economies and and it's not just about China or about South Korea when you talk about industrial policy.
Next. Yeah. Nicolas Caldor has written quite important books on the importance of the manufacturing special.
Properties of manufacturing. Albert Hartman from one of the leading development economies. Has made significant contribution, especially on how to design strategy of economic development.
I was not go in detail to concepts of Hushman, but I would encourage you to look at this book.
It's quite, quite important even with the
In terms of understanding developing countries and industrial policy. Next. Yeah, then we come to.
Hello, I mentioned earlier on research based on empirical evidence and and observations. And these are, examples of, Chalmers Johnson, and then Robert Tw, which is at LAC, who is at LC.
And then, at this time, all these conducted years of research on East Asia and try to present us how industrial policy has been designed, weaknesses, how it evolved.
And this also shows. That ideas and thinking. Extracted from real practice, from observation, from evidence, from, I mean, inductive research is so important and, and I want to encourage you especially to read this, this materials.
Yeah, so this is a background. I want to show you that the industrial policy literature is quite rich with long tradition.
And you said very current and very comprehensive conception. The second area I would like to highlight before coming to the current challenges is on the issue of What are the building blocks of industrial policy?
What are the key concepts? Now what I was mentioning, she has her lecture, this week has focused on structural information.
And for me, the kid definition concept of industrial policy is a government intervention to accelerate structural transformation. And economy culture.
It's not about God's intervention per se. Even in communist systems, government intervene.
But the key point is the government intervention is. Of a quality that focuses to push. That's transfer.
That meaning moving from low productivity, low value, low technology to a higher level in a long process.
And when we talk about economy culture, we mean the lab. In contrast to the ones at the front at the frontier.
So this is a key concept and industrial policies marriage should be measured whether It is promoting such transformations and economy culture.
Second key concept, again, manufacturing. Is an engine of growth and this is an important point which is also valid as we see the industrial policy being adopted in the US.
Take a catch up is increasingly becoming quite important and it's at the center of structural transformation. Again, I want to highlight exports as a key driver of international learning and also pushing and relaxing the balance of payment constraints.
These are important because we know that influential Try to advise that developing countries should not focus on exporting industrialization.
Or they shouldn't focus on manufacturing. So these are quite important. building blocks, from my point of view.
In terms of lead development, And in late camera development, the key concept is letcomers have to focus and pursue industrial policy.
Not because they have enough resources, but because they have inadequate resource. They have dispersed resources.
They have resources that need to be, to be, promoted and developed and the key.
Aspect is that Looking at the ideas that will help us to push. Economic activities which are dynamic is still going to be important.
And here I want to highlight the road of linkage effect is. The principle of preciprocity, which is quite useful now and also protection of new industries and for sure when we think of the role of the government and market we have to see These are complementary mechanisms and it changes from sector sector and also from time to time.
What are the challenges? Of industrial policy, I believe, Richard, we also expand these issues.
The first one is There is a shift in the global economy. From my perspective, the key shifters are Growth is becoming sluggish, the, global crisis is becoming the, is evident in the process.
Not only single crisis, but multiple crisis and volatility and in combination with interconnectedness.
A key features of the current global economy. So these are sources for it's a being fragile but also forces that can bring a global economy to a much accelerated cross.
Second aspect is technology can advances. Are accelerating and this has significant importance. Compared with 40 years back or 30 years back when, let's say, Korea or Taiwan or Singapore where where we're developing.
So technological advance, becomes a critical component in viewing the premature industrialization. What is not just going to invest R&D or on technology, but also the pace of these innovations is going to be quite important and this is is linked with the middle income trap which Richard may be adding.
That point. From a positive perspective. The rise of Asia. Is a key element in the current global economy.
Our 50% of. For the last few years. Is it's being driven by by Asia. 30 let's say 19 in 2022.
9 2023 China has a contributed for about 35% of global growth and India about 15% and combined with other Asian countries, Asia is becoming the driver of global economy.
This has significant importance for developing countries like African countries or Latin America countries. We need to understand the importance of Asia.
As a driver of border economy and and need to diversify economic collaboration as well. And the fourth point is the Multiulturalism is being weakened more than any other time and the governance system is not in favor of developing countries.
Next.
So these are significant implications for developing countries. First, We could see the main reasons that some of the advanced economies are now coming up with.
In industrial policies. First, we have to note that they have always been practicing. But with the, it has not always been a uniform level of intervention.
Nineties and eighties. Because of the high. Wave of, and economic liberalization.
The agenda on industrial policy has been put on the background. Also the practice was not stopped. So here, they new.
Waves have been found by many countries, garments. That is not going to. Help in recovery and stimulate economy.
So in the 2,009 global financial crisis we have seen austerity as a major policy strategy followed but this time almost all advanced economies their governments have been focusing on on economic recovery and putting resources for to stimulate the economy.
Then a second element that also has pushed. Advanced economies to embrace industrial policy and a very aggressive manner is the rise of China and not China's rise.
In the other economic sectors, but primarily in the technological leadership. That is a key element. And in addition to this during the COVID crisis and the geopolitical conditions in Ukraine, in the Gulf, more governments are recognizing that The value chain is not resilient and it is inefficient.
This has also brought the interest of industrial policy to the forefront. So this has significant implications because the resource being allocated by like the US for instance for its is inflation reduction act of Biden.
And the bipartisan chipsat or infrastructure is almost closer to 3 million. This is has never been this scale has never been witnessed in the last many decades.
So the scale, the massive scale has significant implications worldwide. Then the protectionism is also quite aggressive and it's not the ordinary practices of protectionism but even going to the extreme bringing the issue of decoupling going to Then in Europe also, similar efforts are being given being applied, but we also see Significant fragmentation and that.
National level and European Union is not harmonized and, and Europe is losing its leadership. So in broad terms, What we see is, a rush or let's say the gold rush of industrial policy.
And applying industrial policy in the most. Aggressive way and this has significant implications for developing countries to give more forecast to industrial policy and also to boost national economies.
So on the industrial policy challenges. I would like to highlight these few points, but have tried to put in a different category on the next slide.
Is the issue of climate change and environmental sustainability. I didn't want to put it as just one crisis like COVID.
19. Because they Er, we are entering the century. Is believe, ag the great transformation of the coming century.
Is going to ship the direction of economies. It's not also about, you know, containing a crisis.
And does, the climate change is now also the key driver. To invest to finance green technologies, green industries, and we are with missing the fastest shift here in the last 10 or 15 years.
And it's important to recognize this because it could give, 2 major dimensions of this great transformation to use, One is it is a transition from fossil fuel.
Economy to a green economy or carbon neutral economy. Which is going to take decades and a new paradigm but the second one is emerging economies are taking the leadership of this green transformation.
It's not Europe or the US, which is taking its leadership. Let's try to look at some data.
China was not producing a single solar panel in 2,000. It was not producing a single electric vehicle in year 2,000.
It's mainly after year 2,000, China has been shifting to this process. So when you see China as an example, now China is accounts 80% of exports of solar seed solar panels, 80%.
And the cost of solar has gone has diminished has decreased by 90% in the last 10 years thanks to the economy of scale and and and in China.
In terms of LITTLE, over 50 60% in terms of EVs, 30% of global export are now accounted produce by by China.
This trend is going to continue. We see similar front in India and then Brazil as well. So the green, greeting of economic development of the next of the 20 first century.
Key aspect is going to be emerging economies will be the leaders in in green transformation. That we know the politics of fossil fuel economy.
And one good example is And electric vehicles were not, innovated or invented by Tesla or in the last 20 years.
Actually electric vehicles were invented before 110 years. And in the US, they were You got a number than, than, vehicles powered by petrol.
And that production was stopped because of the fossil fuel interest. In the beginning of twentieth century.
So there is a lot of politics going into the face in relation to maintaining the status quo. And the biggest challenge in transforming, the leaf logging into.
A clean and, Kaiwan neutral economy is primarily the politics and political economy.
Qu, even now. Last year for instance 2023 close to one trillion subsidy was given to fossil fuel.
Industry. Then we need to recognize the danger of especially the green device. This is quite evidence comparing that Africa is being left and only 2% of the investment in green technology or green industry.
Is being invested in. In. In Africa and the ultimate message is emerging economies developing economies.
Have a big advantage if they embrace carbon neutral pass and and it's not unnecessary treasure but an important strategy for developing countries to build the next new industries.
My final slide is on. Africa, I want to highlight this because of there is a lot of pessimism.
On what is happening in The quote here is, was published in, Financial Times.
The world's economy biggest problem is Africa.
And we hear from scholars from mainstream media. The message about that. But I would only mention that, such pessimism.
Is not going to Show us the direction. Of the continent in the future because we have seen in history.
Hey, are being considered as. The, darkest continent sending the US during the time of Frederick list.
So a key issue is that in Africa we see some growth and economy transformation in some economies. And we also see that many economies are not, doing quite well in terms of, economy transformation.
When I say economic transformation, I'm not measuring the 4.5 4 5% average, which is even above global average.
If Africa needs to transform. You should be able to grow. At 7% or 8% annually for a period of 30 years, a longer episode if we try to look at Asian experience and also a concepted effort has to be followed to ensure.
That the policy intervations focus on economic transformation, meaning economic diversification, export diversification.
And building. Productive capacity. So. This is 1 one element we need to recognize the lack in terms of economy transformation.
The second important elements, private we need to see is demography. Demography in economic history. Is a key driver like technology.
So this is going to have significant implications in terms of jobs in terms of the project to create jobs in terms of Devon productive capacity and market.
And here's the main problem with many African governments. Is that the policies are not focused single mindedly on productive transformation.
And this is an area where we need, we need to walk. And here we have to look at on how African governments would be building.
A productive state on how they can accelerate. Learning and also exercise. Policy independence. So here I won't highlight, that, the green transformation and productive transformation is going to be.
The only way it's only pathway as a response to the current challenges. Here I have tried to mention.
The current research we are conducting on greening of Africa, economic development and also we have now, finalize the.
Work on the Oxford handbook on the greening of economic development. Which hopefully will be released by the end of 2024 which will also bring in these new challenges in with a lot of amplic evidence.
Contributed by many leading scholars including, Richard. So I think I should stop here, Laura.
And if I take to my time. My apology.
No, you, you're perfectly on time, a couple of minutes early in fact. So thank you very much.
Richard, would you like to share your slides?
Great.
So take it away.
Okay, thanks. Thank you very much, Lara. Thank you, too. You and James for the invitation.
Let me try and follow on as best I can from, I hope I have to say well Compliment why he's just presented and.
And maybe add add a few more. Things into the into the story as well. I'm not gonna give you, I'm not gonna give you all the party the history of, TED, maybe Lauer has done that in one of her lectures. I hope so.
We use, we have done that in one of her lectures. I hope so. We use, we, we have a unique place in the global governments ecosystem.
That is worth It is worth some reflection and I'm not gonna I'm not gonna do that.
But the basic point for this lecture of course is that when, was created in 64 so we're 60 years old this year celebrating our sixtieth anniversary most developing countries of course were commodity.
Exporting economies and they struggled On have been struggling for some time. To sustain the kinds of growth rate that was necessary.
To deliver on the expectations, particularly of newly politically independent. Economies and to close the economic, social and technological gaps.
With the advanced economies and and essentially for UCAD the problem rested with the asymmetric nature of the interdependent world which favored manufacturing exporters over.
Good morning export is the old terms of trade. Debate and of course the way to essentially deal with that problem was to for developing countries to begin.
The process of sustained industrialization. And the, Tanzania, and, has been in this challenge around industrial development.
And the policies necessary to affect that for quite some time. It's really been very much at the center of our vision of development strategy and the constraints that must be overcome.
To affect that vision. Of course, There was and there was a kind of crude empirical support to that to our argument which rested in the simple fact that rich countries, most rich countries.
Had advanced from themselves from relatively poor rural economies to advance to technologically sophisticated, sophisticated economies.
Through building up their industrial capacities. And that gets you into the debate of how you think about that big process of structural transformation that our Kirby has himself talked about and indicated some of the big personalities that have contributed to that discussion.
I mean, very simply, I think. I mean there was always a recognition from a fairly early date that markets prices and property property rights whilst they're good in terms of managing incremental games from existing resource endowments they were not so good at mobilizing more resources on a significant transformative scale and using those resources.
To move into new and more productive. And more dynamic areas of economic activity. And so in that from that perspective the focus is not so much on markets prices and property.
In terms of thinking about the policy challenge but focus on production on the role of profits. And the question of power and power in the double sense, both the energy question.
Which has always been central to this challenge and the question of who benefits, who is, but what are the interests.
Behind the question of an effective transition and transformation. Process when the and that for developing countries of course gets you into the old question of the north.
Versus the South in terms of the global context. But of course as well that should be discussed often not very effectively it has to be said.
The class dimension of structural transformation. Needs to be brought into this story as well. I can be mentioned some of the I's prominent names that have contributed to this kind of perspective on a structural transformation.
The only one I would throw in there that gets very little coverage. In a lot of history of thought.
Accounts of industrial transformation and that's Colbert the advisor the the economic advisor, the the economic advisor to Louis the Fourteenth.
Who actually had before Hamilton before list. Struggled with these problems as France was trying to catch up.
With the Dutch and the British. In the second half of the seventeenth century and and it's an interesting discussion of that in a recently published book.
I would recommend people look at by a guy called Jacob Solar, which is called the free market, a history of an idea which looks at the contribution of Colbert.
To the discussion of industrial. Development and industrial policy thinking. At that time and I would just throw his name into that.
Illustrious part of individuals that are heavy discussed. When it comes, and I think the bottom line when you take a production profits and power perspective on the industrial policy challenge.
You policy, it's all about policy. You can't affect the kind of transformation that I can be discussed without taking the policy challenge very, very seriously.
And when it comes to policy, I don't think the debates Really, but are about means.
And the, the instruments of policy, those are very familiar. In terms of the discussions around industrial policy tariffs.
The use of tariffs, the use of taxes, subsidies. Credit, discretion, discretion, credit allocations, government procurement, research and development.
State ownership. These are these are the instruments that will always figure in a discussion of industrial policy. What industrial policy I think is all about is the ends.
What why why do we need to? And use industrial policy. In this structural transformation challenge. And there is that's where a lot of the debate I think that you probably familiarize yourselves with already kind of focuses.
There's a big and rather inappropriate debate, I think, at least for us, about picking winners and whether governments can pick winners and whether they should stay out of the process.
Of structural transformation or not. It's a false debate. The state is always involved in this discussion.
You know other people focus on boosting competitiveness. As a way of framing the goals of industrial policy others talk about correcting market failures.
Others, Marianna, Masakado's important work about specific missions that industrial policy needs to focus on.
And, and they're Those of at least some of those I think have a useful contribution to make.
My own focus really is on and I think, Kirby has. As indicated this already. I think industrial policy ultimately is all about raising productivity growth.
As the key. To affecting the kind of structural transformation that we're talking about, at least the way we think about industrial policy in our work is how can we how can developing countries find the means and the strategies to ensure that you have a sustained and ideally rapid growth.
Of productivity. And, and in that context, and I think it's an important debate that you may well all have begun to think about.
Is, is the one around where the manufacturing activity is somehow unique. And, and in a sense better than focusing on agriculture or on the service economy and I'll come back a little bit.
To this debate later because it's resurfaced again. In some important courses. I guess for the work that we do in Utah and that we've done for 60 years.
Manufacturing is not unique, but it is special and it's special because when you take a productivity perspective on the structural transformation problem and challenge.
Then manufacturing seems to be an area where the levers that drive productivity growth are heavily concentrated. Then it's again it's you find these in other sectors of the economy but they are particularly concentrated in in terms of manufacturing activity and this takes you through the history of thought that the archaeb I think, discussed earlier.
Manufacturing is It's particularly suited to a complex division of labor that embodies both specialization and diversification.
Dependances that goes takes you back to the work of people like Adam Smith of course. It is it is particularly susceptible of beneficial benefits from scale economies.
Both internal scale economies and external scale economies are particularly present in manufacturing activities. The questions around innovation and learning that I can be talked about again very prevalent in in the manufacturing sector.
Compliment complementary investments. In infrastructure and other areas, are, again, often very prevalent in manufacturing.
Processes. And the old and very important concept that that was introduced by Albert Hirschman in particular around the building of linkages.
Of both backward and forward linkages, but also other linkages. That I think is particularly distinct in when it comes to manufacturing activities.
So this is just a set of reasons. The mate you want to focus on manufacturing as a particular important driver of productivity growth and and and when you do that properly the notion of being able to establish a virtuous growth circle.
With productivity at the centre, I think is the kind of the kind of goal, the golden, the kind of golden goal of much thinking.
About industrial policy. And, and certainly the success stories that we talk about. In East Asia but also in sectoral examples but people like Mazakata discuss in great detail.
That notion of a virtuous circle driven by probably strong productivity growth I think is it the center of those discussions.
There is a there's an important addition that you need to think about, I think in that notion of a virtuous circle.
And that's the central role of job creation. as part of the structural transformation process.
And, you know, without a shadow of a doubt in the early stages of development as country as countries move out of agriculture and primary.
Activities into more productive activities. The question of job creation is is very important that's central to the and classic development model such as the Lewis the Lewis model.
And I think it's also the true that, in many developing countries today, The problem of informality and the extent to which economies depend upon informal labour markets and job prospects.
Is a particularly a cue problem. That makes job creation and and decent job creation. A persistent challenge that can't really be divorced from.
The wider challenges around structural transformation. And the role of industrial policy. I think when you get to higher levels of in development that becomes less significant as a problem but for many developing countries including as Zark Kevin noted, middle income countries, that that challenge around job creation.
Remains a central one that cannot be avoided by by policymakers. And, you know, and so those are old problem.
Those are not new problems when it comes to thinking about industrial policy, structural transformation. There's a question and I think I can be raised that quite rightly about whether the changes that we've seen in the global economy have somehow made industrial policy less significant.
In the current era than it was at the in the kind of classical era of development thinking. In the 19 sixties in the 19 seventies and that's the rise i think as Laura mentioned of a world in which global value chains have become a prominent way of organizing international trade where new technologies.
Digital technology is artificial intelligence and having a particularly profound impact on the trajectory of economies where China has become the factory of the world and where the size of the Chinese economy has profound impacts.
Beyond the Chinese borders and also the where a lot of activities seem to have become concentrated in the service.
Economy and and and the tertiary sector. Which has given rise to an interesting side debate that you may all have already picked up on.
In the work of people like Danny Roderick and Joe Stiglitz. Both of whom were very prominent in promoting industrial policy when it was out of fashion in the 19 nineties and early 2,000.
As the World Bank preached, a very simplistic form of development thinking around the Washington consensus and, and the notions around comparative advantage.
And and but have moved in particularly in the last few years to an argument that industrial policy has become less important for developing countries because economic Structure and dynamism has shifted away from manufacturing towards service sector activities and it's an important debate I think that you should all look into.
I disagree profoundly with with Roderick and Stiglitz on that issue. I don't I don't think the some of the changes that they discuss are sufficient to underplay the importance of No manufacturing activity and a more classical form of industrial policy.
I think that remains key and maybe I can just quickly say why I think that's the case. As I can be said, a lot of countries have lost.
Manufacturing activity. At a level of income that they should be adding manufacturing activity. What Well, what has become associated with Danny Roderick's term premature de-industrialization.
A term I have to say, the untad coined 10 years before Danny. Danny Roderick became attached to the term which kind of slightly a myth for us but but that's okay, we provide a public good.
And and and and we have to accept the consequences of that but premature industrial de-industrialization is undoubtedly a problem in all parts of the developing world.
Outside of East Asia. And that needs to be framed into any sort of, I don't think the solution to that problem is that's try and improve our service sector.
I think the solution to that problem is how do developing countries that have lost industrial capacity when they should have been gaining it, get back into the industrialization game.
As you can see from this i mean i think the question of informal an informal Workforce is a particularly profound one for much of the developing world.
Indeed it distinguishes the challenges that developing countries face from those challenges that you find in advanced economies and that's an important debate because a lot of a lot of conventional economic thinking.
Don't buy into the story that developing countries are structurally different from developed economies. Are structurally different from developed economies.
That we think that's a deeply misleading characterization of the development challenge but you hear that a lot.
If you if you listen to economists from the World Bank or the IMF, this idea that the problem is not in the structure of the economy.
But it's in the policy, the mistaken policy options that countries have faced. That's true.
That's also, it's not just in the informality of their economy. It's in the way in which those economies are much less dependent on, sorry, much less.
How much weaker users of fossil fuels as the driver of economic development, we will come back to that in at the end of my presentation.
There's a clear, there's a clear energy divide in the in the contemporary global economy between much of the developing world China is an exception.
And the advanced economies in terms of the extent to which they generate energy from from fossil fuels.
As, third problem that I think is linked to the industrialization challenge that Laura mentioned at the beginning and it seems that you discussed.
Last week in a previous lecture. About just how indebted the developing world, the world in general but the developing world in particular has become over the last 40 years of neoliberal dominance and the consequences that has for framing the policy challenge is a very profound one.
I'll try and say something about that at the end of my remarks. And, and finally just to.
A point that I don't think has received enough attention. In a lot of the discussions around structural transformation.
Which is just the how despite the fact that the advocates of a kind of neoliberal development policy agenda have sold that agenda as being good for business and therefore good for investment.
If you look at investment patterns over the course of the last 40 years, they haven't actually been particularly a positive.
Certainly that's certainly true of the advanced economies, but it's actually true of much of the developing world that is not, that needs to, that needs to be, experiencing investment rates around 2530%, but outside of China has has for the last 40 years struggled to get that rate be of above 20% of their of their GDP and that that pressure on investment.
I think is something that we need to talk about much more openly. And in terms of alternative development strategies than than we've done before.
So, there is, there are some long standing challenges. I think it's Lara mentioned.
That remain pertinent to thinking about the development policy challenges in the 20 first century despite all the changes that people talk about when it comes to this hyper-globalized, technologically fluid world.
And that's why, at least for us, industrial policy remains an important part of the toolkit that we think should be.
Developing country policy makers. Need to advance. And when it comes to thinking about industrial policy and what what the challenges are that face developing country policy makers I think one that always comes up and is an important one, deeply important one.
Is the fact that unlike a lot of other broader policy instruments. Targeting is an unavoidable part of the industrial policy challenge.
It's a more selective type of policy regime than is true of other more macroeconomic policy regime than is true of other more macroeconomic policy initiatives, for example.
And to get a handle on that. I'm that challenge. We do distinguish in the work that we've done between what we call passive and active industrial policy.
And passive industrial policy essentially are policies that accept the existing endowments and structure that characterize economy and focus essentially on reducing the cost of doing business and improving efficiency.
They, they, focus very much on on price based instruments and and within that framework over the course of the last 2 or 3 decades.
A very strong focus on attracting foreign direct investment on kind of nudging comparative advantage. Rather than making Boulders, bolder types of structural transformation very much have frame the policy agenda and it's quite consistent with more.
Learn, neoliberal policy. Frameworks and, and I think, as that, Kevin mentioned, you know, industrial policy has never really gone away over the course of the of the History of the twentieth, 20 first centuries.
But it has taken different forms under different types of policy regimes and that includes neoliberal policies that that use a particular form of of industrial policy as part of their attempt to advance a market-based agenda.
In that sense, we think the and kind of more active notion of industrial policy, which seeks not only to change corporate structure and investment behavior.
But also seeks to transform the underlying economic structure is it a critical part of any sort of successful development strategy.
I think along the lines that the archaeology described in his in his presentation and that it adds a very different sort of inflection to policy making and the policy challenge.
A more demanding one, it has to be said, the passive industrial policy. It's about what Alice Hampton called getting prices wrong.
In the famous phrase that she used but you know it's also involves issues of soft planning of public ownership.
Of things that have dropped off the in the policy agenda in recent years but I think need to be brought back.
If we're gonna have a series shot at making the kind of transformative changes that developing countries need to meet their to meet their multiple goals.
One particular issue within this, framing of industrial policy is this kind of a more active targeting agenda and a very difficult one for But, many policy makers to come to terms with is that almost by implication, active industrial policy creates rents.
And rent creating is therefore a very important part of the industrial policy. Agenda, but he's one that can also go very badly wrong and a lot of developing countries have suffered from policy initiatives that have clearly created rents for select parts of the of the industrial or economic elite.
But have not really. Driven a process of strong structural transformation. So how you manage rents is a very important part of an agenda that is focusing in a much more active way on the use of industrial policy.
So that passive active distinction is I think a very important one. The other important one that the distinction that we've used in terms of describing industrial policy is also a difference between a kind of isolated approach which just looks at industrial policy in the context of specific sectors or specific firms and a more holistic approach to industrial policy which recognizes that you have to embed industrial policy in a much more integrated approach which links it to
macroeconomic policies to financial policies to trade policies and therefore requires a lot of coordination across policies.
And across institutions responsible for policy making, which I think brings you to the center of the kind of discussions and the controversy around industrial policy, which of course is the role of the state in the development process and that's I'm sure you from the readings and the work that you've already been doing, you know full well that that is a very contentious issue.
With not only economic consequences but profound political disagreements also involved in that discussion. We in UCAD believe the developmental state is a key component of any successful strategy and that the developmental state must be a transformative state and it must have certain qualities if it is going to use industrial policy as part of a wider more holistic transformative strategy.
And I've listed some of the qualities that I think are necessary to describe an effective developmental state here.
Experimental, engaging, enforcing. And the enforcement role of developmental states are critical and and unfortunately not sufficiently discussed in a lot of the literature.
Alice Amston was someone who did discuss that, I think, in a in a insightful way. Because if you're gonna, if you believe that, you know, creating and managing rock, rent effectively is a necessary part of the industrial policy agenda, then you have to recognize that you If you're going to provide rents as a encouragement to firms to improve their performance move into new activities.
You have to be willing and able to discipline. Those firms and businesses if they don't deliver on what you are expecting as a policymaker from the Largest that you are extending to them.
And so that role, being able to discipline capital. Is a critical part of the industrial policy agenda and that is a big problem for many developing countries in the current way in which the global economy is organized and I think Lara was hinting at that in what she said in her introductory remarks.
Because when we look at the kind of direction that 20 first century capitalism has moved in in terms of international trade where where trade agreements have have squeezed the room for many policymakers to operate where the power of corporations that have become much more concentrated.
Over the course of the last 2 decades or more makes it difficult for firms to push large corporations in terms of technological demands.
And and and and other aspects of the upgrading process and in terms of building this the fiscal space, the resources that governments need to be able to contribute to a sustained process of structural transformation.
So, so, you know, the way in which international trade has been organized over the last 2 decades.
Is making the role of the developmental state much more difficult. And that problem is compounded, compounded by the fact that We're not only operating in a more open and highly concentrated global economy.
We're also operating in a very heavily financialized world, which at least from the work that we do in Utah, it is a world that we think is hostile to.
The kind of active industrial policy that is needed to affect structural transformation. And and the branwoods institutions have contributed to that but this is not just about the bratwoods institutions this is very much about the way in which.
Governments have allowed an excessive amount of deregulation of financial markets over the last 3 decades. And the way in which in that world of deregulated financial markets policymaking is driven into a much more austerity kind of dependent mode which produces a short-termist and rather unstable approach to policymaking, which is clearly inconsistent with the kind of industrial policy that that we've been looking at and I think that
our caby was was talking about which kind of leads us to a couple of big issues that I'm going to just leave and throw out for you because I think they're on everybody's mind right now.
One is the rediscovery of industrial policy by the Biden administration. And, and it's an important shift in American Hold thinking, I think at least it's one that we welcome in UCAD.
But we are nervous about the way in which that embrace of industrial policy is, is, has taken place.
I think, and I think the Biden administration should be commended for it. It has contributed to a US economy that is clearly outperforming the rest of the developed world at the moment.
Archivie noted the headline that Africa is the is the real problem in the global economy right now for us the real problem in the global economy is not Africa the real problem is the European economy which is doing extremely badly.
And and and has a very dogmatic view of the kind of policy challenge that it is facing. In that sense, the US, the US is a much more, it's a much more flexible, a much more pragmatic agenda.
It's a much more holistic approach to the problem. Industrial policy is used. And par as a recognition to deal with the inequalities that have emerged under neoliberalism.
The Biden administration is very explicit about that. About the resilience challenge that our Kerry mentioned with the breakdown of value chains and with the fact that they now think that they need to catch up with China in certain areas of technological development.
So they have things that we like in that in that agenda. And a strong commitment to industrial policy as part of an integrated strategy.
I do think when you look at the Biden approach, I would see it airing more in the direction of passivity than active than an active policy.
It's very dependent on tax breaks in terms of the resources that it gives out, but I don't think they're willing to attach to those tax breaks a a desire to discipline business if it is not delivering on the kind of expectations that the administration want.
That's a big question about whether the US has itself the kind of developmental state that is consistent with effective industrial policy and and particularly worrisome for us is the way in which they developing this policy approach in a very unilateral way which is further undermining a multilateral system that is clearly not being in a position to deal with the multiple challenges that the policy makers particularly in the developing world.
Are facing and there's a whole debate going on I'm sure you all know about. In the context of the WTO.
And the reform of the WTO that the US administration's beginning with Obama have essentially defanged by by not allowing the dispute settlement.
Dispute settlement mechanism in the WTO to be operative. So, so there's a big debate going on in my in my town.
I'm in Geneva about what W what the WTO is all about what kind of reforms are needed if it's going to be an effective institution to deal with the problems, particularly the developing countries.
Are facing. I'm gonna leave it there, Lara. I have a lot to say about what our Kenya is already talking about, which is the role of industrial policy in the in the climate development challenge.
We don't think you can do, you can't meet those compounding challenges without effective and active industrial policies.
But as we insist in the work that we've been doing, that is not a stand-alone policy approach.
It requires a lot of support from the macro side of the economy. As well as from the employment side of the economy.
And it's not just about state policy, it's all also about the kind of financial system.
But it's consistent with mobilising resources and directing those resources to meet the energy problem to meet the problems of climate adaptation.
Etc. I think I'm going to leave it there because that may be an issue that people want to pick up on in the Q&A.
Hello.
Okay, thank you. Thank you very much for, Richard. Can you please stop sharing your slides, Press?
Thank you. So we have 2 questions already from the students online. I'm not sure.
Do you hear this? Laura? Do you hear with this mic?
Yes, I can hear you, James. So if there are also questions in the room, I don't even have to say that I'm gonna favor women because so far all of the questions are from from women.
So maybe I need to push them in to ask questions. Can we start, we'll take the 2 questions online first and then we'll take one more from the audience this round and then the next round.
We usually take 3 at once. I hope that's okay. So, Maria, can I please ask you to turn on your video and ask ask your question?
Yeah.
And if you could very briefly introduce yourself as well.
Hello, I'm Francisco. My dear Francis, I'm a student of the Masters in Public Policy.
And I've been recently doing research on raw minerals in Africa so I wondered KOW, and the transition minerals could be a part of this transformation and in which ways or what do you think are the changes that the countries should do in the matrix for industrialized the mining sector in this case but in our different ways not only relying on extractives.
Okay, thank you very much. I have another question and the student prefers for me to read loud.
So this is from Anne Marie and she asked, do you think that resource nationalism through local content policies in developing countries, especially of extractive resources as a viable strategy in their structural transformation.
And then I think we have a question from the floor.
Yes.
Okay.
Stand up. Do you hear me? So I was wondering how do you think that Latin American countries could play a more strategic role in the green transition considering that countries such as Chile have vital resources.
But let the investment and infrastructure that for example other countries have like the US and who do you think that industry of policy could be financed without increasing that fragility and the dependence on financial markets.
Okay, those goog together quite well. So we'll start with those 3. I could be would you like to go first?
But you are on mute.
Yeah, Africa is, one of the reasons with, rare Earth minerals, which has now become quite critical with the Expansion and constraint in in chips manufacturing.
So the first point, I want to highlight from an African perspective is Africa never had. A problem of resources at all.
It has the wanted 60% Arab land.
But many of countries have not been foot. Sufficient. And we also know there is huge resource.
That are relevant for these critical technologies. So the first point is from the conception.
One wrong element will be starting from from talking about resources. Because if the policy is not there for instance from the very beginning to ensure that Let's say extractive industries.
Can be properly managed as a public resource as a nation's resource. And if the legislative process is not right, then definitely the new.
Hi, agenda on rare minerals is only going to fit corruption. And he's not going to be to be helpful.
The second aspect is with this new discussions on rail, by the way. The geopolitical tension, the geopolitical risks are also there quite significantly.
We see for instance You don't. Putting pressure on some African countries where these results are independently available.
Saying that these are not resources are not fairly distributed to be used so a big risk is this could lead into a geopolitical tension and that will further disabilize some of these African countries.
Countries like DRC. Are quite quite in a very difficult position in terms of. The other element is if we look for instance, As example, the green hydrogen.
The potential for green hydrogen is being discussed in Let's say, LinkedIn, in Egypt, in Morocco in South Africa in Mauritania, Namibia, But from my perspective, what I see, big potential is where already the government has a very clear policy.
Green industrial policy. To promote some industries can be. I can really, pick these industries. They say Morocco.
Has, one of the largest, fertilizer producers. OCP or CP is now working on moving to green ammonia.
Which is which is quite important which means they are building on the industrial capacity. But in the absence of that, even if there is millions of tons of cobalt lithium in the RC.
If the industrial ecosystem is not, if the industrial policy is not. It's unlikely this could be used.
Well, potentially to drive economies. So I see a big, a big, risk.
And, and, and, when the discussion is. Okay, on resources. While we know that those countries that have really prospered is not because of resources, but because of policies and also invested.
In people then we have to be to look at the agenda as it's we are getting the all discussion that Africa is always switch has minerals, etc.
But we never talk about policy. We never talk about a productive and developmental seat. So I think we need to build this in mind.
Can push structural transformation. There are there are many good examples not always one of the because they say producers of and they have been using it to develop a long standing industries.
And have used this also as a resource for, sovereign. As part of so the key issue is The policy to develop extractive industry in a way that promote structural transformation.
But also ensures equitable, growth is, a critical, element. In cases like Nigeria, we know that being one of the oil producing countries, crude oil has been exported.
Until now and but refined oil has been imported. So, the, and this has many of these oil producing countries or fossil, oil dependent country economies.
Have been quite slow in diversifying their economies. Because the pressures the push is always a week to move into a more dynamic industries.
Okay, Richard.
Sure. Look, I mean, there's a real concern in Africa right now about a kind of green colonialism resurfacing.
Africa provides. The resources, the critical minerals. And even to some extent the energy and certainly no so exporting solar and imports all the high cost, manufactured.
I'm consumer and capital goods. You know, in a funny way back to where They were when, was established.
In the back in the 19 sixties and that's a really it's a real concern I think that It's one concern that many African policy makers have.
You know, and, and, and there's a push back against them push back. I'm not, I mean, African, at least in the WTO.
African, representatives are now much more. Conscious of the importance of industrial policy. As a way of avoiding that kind of trap.
And so they're pushing for changes in the trade legislation and the WTO to allow them greater policy space to do what they have to do, which is, as, said, to take the resources that they have and find ways of adding value.
To those resources. That allow them to upgrade and, diversify their economies. And, and, and it's doable.
We, the country that actually has done has gone further in that direction is Indonesia. Indonesia is a a major nickel exporter and and for a very long time was simply an exporter of raw nickel.
Nickel is very important. Increasingly important in the context of the of the new green industries. In electrical vehicles and other areas so essentially, and essentially Indonesia banned the export of raw nickel.
And at the same time, found, tried to bring in and has done so to some extent successfully.
To develop the industries that Can process that so you're not just exporting a low value raw material, but that you're engaged in the processing businesses and that's a long standing problem.
As I said, you pointed out, you know, countries like Nigeria have always been energy rich but have have been energy dependent when it comes to the refined product.
And so they, they, they've, they've tried to find ways to, use industrial policy to diversify their economy into to diversify their economy into processing and now moving into the world of electric vehicle batteries.
Attracting foreign direct investment particularly from China. China is now establishing EV battery plants in Indonesia so you get something like a more complete value chain that is at least in important areas adding value and creating jobs.
But are not of these of the kind that traditionally plagued Indonesia. And that's the kind of strategy I think that needs to be repeated.
Now in Indonesia is lucky that is because the WTO I mean, the Europeans have taken the Indonesians.
To the WTO. dispute through the distribution. I they can do it but they can't impose any any any outcomes on them because the dispute settlement system has been neutered by the Americans because the Americans refuse to appoint judges, Apply judges to the WTO body.
So, you know, the Europeans can complain as they like, but they can't actually do anything about it.
So, and, and so I think it's a moment when other developing countries need to use this strange geopolitical space.
To once again get back into the industrial policy business in the way I think the Indonesians have. In the context of nickel exports and I think that's that's the kind of strategy that is that is that is needed.
Just on the line American question. I mean, you know Again, I mean, you know, sadly lots of Latin America have been.
Experiencing premature de industrialization now for 2 or 3 decades. So, there they've in a certain sense being caught in the middle income track.
And they and they're gonna and they're now looking for I mean if you take the Lula government as being indicative then you know they are very conscious of the need to Re-industrialize and And, and at the same time they want to do that in a more responsible way than the advanced economies.
So they're thinking about what green industrialization means in in their context. I think I think And, and, you know, and they're thinking hard about the kind of industrial part if you listen to them in the context of their role in the G. 20.
They're very conscious of of this issue and they're thinking hard about what kind of industrial policies a middle income country like theirs needs to both, you know.
Re-establish a strong industrial base, but to do so without the kind of damaging consequences that today's advanced economies have imposed on the world.
I, I think at least for us there are a couple of things that need to be. Put on the table if that's going to happen.
Not so much for Brazil, but for much of other parts of line in America. They can't do this with the burden of debt that they face.
Maybe this was an issue that came up last week in your discussions later. I mean the burden of that in many developing, including Latin American countries.
Is just too high for them to be able to make the investments in these areas. But allow them to meet both development and climate challenges.
So dealing with the debt problem is a multilateral problem they can. The solutions that the IMF has come up with essentially are imposing the burden on the countries themselves and and and it's a you know a creditor friendly responds to that problem we disapprove of that greatly and we need a multilateral response to the debt challenge.
And I think that that's certainly true. It's true of African countries, but it's also certainly true of Latin American countries.
We want to see a bigger role for public banks. I mean, bandits has a critical role, has had a critical role in Brazil's previous industrialization drives, neutered to some extent by Bolsonaro.
But is now coming back as an important tool in the end industrial policy agenda of Brazil. That's development banks are critical to effective industrial policy and and we need and other countries not only land America need to get back into the game of building their own development banks, that's critical at least for us.
So we would like to see that. I think that what the other issue again, which is as much international as domestic.
Is the question of technology transfer? I mean, green industrialization requires technologies, many of which in many of which the advanced economies have a very dominant role.
And protect that dominant role through intellectual property rights which are protected through trade agreements, both a multilateral and a bilateral regional nature.
And, and if the North is serious about supporting the transition, then it's going to have to find ways to ensure the developing countries access the appropriate technologies at as reasonable a cost as is possible because clearly that is not the case at the moment.
And that can again can only be solved I think through multilateral negotiations it can't be solved by by by countries.
Doing the right thing at the national level.
Okay, thank you for those. Those are great answers. I think we have a question in the room.
James has a question and I have many questions, but I will sacrifice for students if there are more questions.
I can see there's a question at the back.
No, we have we have.
Oh, okay, questions at the front too. I think if the person at the back, I think you should come to the front.
Well, we now have a microphone that rose. Okay.
Okay. So if you could also introduce yourself and then also keep your question brief so we can ask multiple questions.
Just getting the camera, that's all. I'd rather be. So yeah, it's working.
So thank you for your presentations. I had a question specifically for Richard. You talked about the necessity of raising productivity and how manufacturing could achieve this in order to.
Empire development. And you also talked about the challenge to of job creation. And so I was wondering with the rise of.
Robotisation and automatization of. The process of manufacturing. How can we ensure that the growth that is created with manufacturing is not a jobless growth?
It's a pretty broad question. I'm just wondering if given some thought to to it. Thank you.
Good.
How do you come into camera there?
I think you both. I had a question. I appreciated that you included scholarly work and academic work that we could reference.
I didn't know if there was anything further also of institutions in organizations apart from Munkh that we could look at that would that publish interesting reports or that either of you find as interesting sources for industrial policy work that's contemporary.
Good. One more from the room. Hi, yeah, hi, Nicholas development studies.
Quick question coming back to this kind of dog in stickless argument that you made. On the one hand, we have now kind of limiting limited policy space due to multilateral trade agreements, VTO, etc.
On the other hand, we have the problem that countries like US, China investing. Therefore, The big question is can we consume all these goods that we put on the international markets?
I see a lot of arguments for manufacturing and that kind of stuff but have small countries in the special development in country still a shot in industrial policy or should they go to services?
Okay. So should we go and reverse order this time? I'm going to ask Richard to go first.
Let me try and tell you the, I mean, you know, I think the, the stigma is Roderick debate needs to be Address, I, you know, is a significant sorry, challenges that they pose.
I mean, I mean the irony is to some extent for me the irony of the debate is most developing countries are service economies.
I mean, if you look at the, if you, when you talk about informal economies, right, and I went through my the figure from the ILO rather quickly but you know for large parts of the developing world including middle income countries Upwards of 50% of their labor forces in the informal economy.
And those are, they're in service activities to a very large extent. And clearly that that that service is not that model of a service driven economy is not working.
I think, you know, the flip side of that, of course, is that there are certain services that are very high-tech and very I pay my financial services being an obvious one but but a lot of other business services.
I think, well, I don't get from the Roderick Stiglitz approach is that many of those services When you look at successful economies that that have strong sophisticated service that goes.
Those sectors have grown out of the manufacturing. They haven't kind of magically appeared from nowhere.
They've grown out of them of a strong manufacturing experience. And it's not, it's not clear to me in the argument that they these people make how somehow, you know, poor African economies are somehow going to leapfrog into highly sophisticated financial services.
Which it should be said and not actually very job intensive either. That is they're not going to absorb large parts of the 50% plus of the working population that is actually working in in bad informal jobs.
So, so I mean I think there's a lot I'm not persuaded by that argument.
And, but it's, it's an, it's an ongoing discussion that I think needs to be.
Needs to be taken seriously clearly as a as part of the development policy challenge. Boy, you know, who, I mean, I think, I think on who else we look at.
Which other people we read, I mean, maybe our Kevin has a better. I idea than than I do.
You know, it's funny that in the last 4 or 5 years, you know, you've seen work coming out of the Washington-based institutions.
You know, there's a famous paper by a couple of IMF researchers called the the policy that shall not be named using the Oscar Wilde.
Kind of analogy. And and well I've seen good papers from the World Bank too on on industrial policy challenges.
I mean for us the problem there is not just the researches but those kind of papers don't have any impact on world bank policy when it actually comes to advising governments in the field.
But, but that's that's another story. I mean, I think there is some interesting work coming out of some of those institutions.
You need, oh, we still use, but it's more, I think it's It's more come from, I think it's more come from scholars really.
Than, then the international but the and and development banks I think we're seeing more and more good work coming out of development banks.
You can I mean, band S used to do excellent work. I think it will get back into that game now after the Bolsonaro episode.
We see we see interesting work coming out from the Asian Development Bank for example on industrial policy. I mean there are I think I think At least from our point of view, I think, you know, that reconnecting financial institutions to the industrial policy challenge.
Is a critical to future success and I think it's beginning to happen. And so, so we take some encouragement.
From that
On the on the I mean on the question of jobless growth and and the problem of of new technologies.
I think there's always, we, you know, we did some work. 2018 on the on the Spread of robotic technology.
In developing countries and because it was a before COVID there was a growing concern in both advanced and developing countries.
But that, you know, robotic technology was going to be a job destroyer. Didn't, didn't happen really.
Now we're hearing the same about AI and maybe there's more there's more I mean the the IMF came up with a study that anticipated that something like 40% of jobs would be destroyed in the advanced economies.
You know, I mean, job creation ultimately is a macroeconomic challenge as well.
And if you if you have a vibrant expansionary macroeconomic regime jobs will be created if you operate in an austerity driven debt dependent macroeconomic regime.
It will not be. It will be an environment hostile to job creation. So I think the question In response to the question, I think you said it's as much about getting your macroeconomic policy right as it is about getting your industrial policy right.
And sadly, the IMF and the World Bank still don't get macroeconomic policy right.
I think that's more of a challenge. For developing country policy makers right now than technology or industrial policy.
Thank you, Richard. Bakovic, would you like to?
Yeah. On, on the list of, publications I think we have to relate with the with the team and subject we won't study.
For instance on green energy. We increasingly see I. And Iran are producing important publications. Well, now Africa, you and, has been producing.
Very good publications. We also see a new wider also publishing on, development economics.
But the key point is the perspectives. That permits these publications. Is a key factor in terms of in terms of quality.
For instance, from the perspective of alternative providing alternative views. Most of the contribution has been from from scholars rather than institutions.
And I would consider. Aunt as outlier as it has been. Offering alternative use in on many issues.
So, I think. And could provide you. Guide us on this subject.
Increasingly now the open access is becoming. Quite useful instrument. And, and it's always good to look at.
Some of the publishers websites to see. The open access material to and the publications which we have been involved with.
I'll be sharing with Laura and she may be able to. To make it available to you.
Having said this, I want to focus on on the key point, link with robotization.
Organization has been very, very popular, not now. 6 on years ago. It was just the number on agenda like AI is now currently has dominated.
And, and the scale and, and, expectation. Impact of robotization was quite quite dramatic.
I was in, in, China. 2 weeks, I mean 2 months back.
And had to order my breakfast. In my room room service. And the one who brought me breakfast was not a waiter or waitress.
It was. A robot that pros to. To my room and this is China 1.4 billion population and the biggest expansion of robots.
Mechanization, automation is in China. More than any of the advanced economies. So the key is.
This, some of these technologies will obviously replace jobs. But they also can generate economic activities.
That will allow new jobs and new employment in new industries and also upgrading of industries. So to my understanding, looking especially The example in China where massive expansion of robotization is happening without any restriction, it's just being encouraged as a government of policy.
Probably it's part of the solution. Also to issue of this. Aging of the society as well.
China has started to for the first time, population has freezed. In 2023 and is going to decline.
And the smaller part of the population is going to support a bigger part of the population. So we shouldn't, I don't think it's a big threat.
And the approach should be. Especially developing countries to seriously take these technologies. Understand them, not in general terms, but sector by sector, by economic activity.
To see how to capitalize in augmented capacity and also in a way. To reduce where there is some vulnerability that could be the best output because every technology in the last 3, 4 centuries during the.
Capitalist development has, has always been the same. So I think we shouldn't be alignment and, and the key element here is education and technology can't play.
An important role because from the early stage in primary schools students should be trained in a way that they can be.
They would be able to take jobs flexibly and also when some jobs are decreasing in terms of.
Scope and and also new jobs are created they can easily adjust so it has the implication on technology and and education.
On the issue of services. I would prefer to present a good example. Which I believe is relevant to understand this aspect.
Again, 2 3 decades. A major discussion has been service sector is growing and actually a new terminology was created.
Service service. Saying that now the services sector dominated. And Let's look at Singapore.
Singapore has developed the most dynamic services sector. Especially financial, financial sector. In Singapore is among the best and the biggest sector.
And services is so important. Singapore up to now they follow a policy. To maintain the share of manufacturing up to 25%.
And When you ask them why they do that, the reason they say is The growth of the services sector is being driven and is linked with manufacturing.
That's what they say. Logitech is a major part. And logistics is linked with manufacturing with with merchandise goods.
And. So a key issue is manufacturing continues to be so, so important.
Even in the most advanced economy like the US. Yes, in US. My factory had a major share in GDP in the fifties.
30, 32%. And let in. It went down to 20%. And.
Bye. It's came to 1213%. Now it's about 10%.
And one of the major. A aim of this IRA is not just to, greeting, but also to develop industrial capacity.
You develop manufacturing capacity because innovation cannot be sustained. Without the development and the link with manufacturing capability. So it's an important component.
Then when we talk about manufacturing, one key issue we need to can see that it's impact as a map its multiplier effect is our own economy in terms of job even like any J we have seen.
A single manufacturing job creating many indirect jobs. On average it said that on average, again, I'm qualifying that every single manufacturing job can create 2.2.
In direct jobs. And Ellen Musk was was referring to his. New plant in in Texas and he was saying the factory employs 10,000 But the indirect employees are about 50,000.
So when we talk about manufacturing, it's about exports. It's about technology and innovation.
It's about job creation. It's about productivity overall. The special qualities. Properties which are which are highlighted and when we look at services One of the reasons is expanding.
Is that first it's becoming increasingly tradable. treadible service.
So which means bigger market scope. But we also need to remember many of the activities which are now considered within service sector where originally part of the manufacturing.
Sector like IT. Including after sales or log 6 distribution warehousing all these are part of manufacturing in the old classification.
So having said this, the right approach should be. For, governments. Because employment creation has to be sent to in all industrial policy, especially developing countries.
Developing world like African countries because they have to create jobs. It's so important. First is the first point is There must be a policy.
That encourages. That provided support for all job creating activities without exception, without any exception, any sector.
This is not going to be high resource interest, resource intensive. But there must be an environment that encourages jobs and also that clears obstacles.
This is, this is not industrial policies, it's just to ensure jokes are increasingly created even.
Vendors, street vendors is an activity that's important in terms of supporting families.
Second, government should have a policy. Where they put a concerted effort where they identifies traffic sectors.
Priority sector switch. Earlier Richard mentioned targeting. They must have few targets where they put their resource where they put all their policy in, where they put a lot of effort in learning that will drive the economy.
These are important drivers. For productive jokes for innovation, for developing the productive capacity. When we also look at services we shouldn't generalize in general terms.
You know, all African countries service sector. Is over 50%. Even, where manufacturing is below 10%.
Is that critical issue is not That classification services should be unbounded. What are we talking about when we talk about services?
Is it informal sector? The key here is I can just give you some policies where this can have an impact.
Is, is driven by TPN lines. And it generates over 5 billion, dollars from export of services, from aviation.
Tourism in many places like Horatius or Egypt is a critical industry. They have significant impact also on job creation.
So we have to unbound the services sector and service sector are important where there is a possibility to generate for an exchange or opportunity for exports.
Where it has an impact on job creation, decent jobs. And also where there is opportunity for linkages.
Yeah, so we need to, I think, look from this perspective. Same thing with agriculture.
Agriculture to my understanding is a critical, critical element of the industrial policy. In the FPRS case or to culture sector or floriculture sector and export sector was part of the industrial policy.
And, with new knowledge with new mechanization, also, The technology linked with freshness which Chris Kramer and John Sandra have have done some significant work.
When we interpret industrial policy, we need to look at high productivity activity. In manufacturing, in services as well as in is in agriculture but it doesn't mean that manufacturing is the list priority actually if I put this out bring manufacturing because it has significant impact also in driving productivity after the various sectors.
I could be I just want to go back to the room just to make sure if there are any more questions.
Are there any more questions from the room?
No? Okay. I mean, next week in DV. 400 we're talking about.
Yes, we have a lot of questions here. Alright.
Oh, okay. So maybe we'll take a couple more questions. We haven't got much time left.
So if students could keep the questions quite concise. And perhaps Richard and Archipe, to also be concise.
Okay, so. Is that not so? No. Okay.
Unmute the thing.
There's a little button there. On the mic. Yes. OK. Hi, it's Francesca.
Thank you very much for the talk. My question is related to the job creation and economic transformation of the states.
How do you think that this industrialization can lead and kind of tensions within? The localization of people and the capacity of the urban settlements and and see it is and how do you think that, this can be provided by the state that is, that doesn't have the capacity yet because it's building the capacity and Just this.
Thank you. Great. Thank you. And so behind you.
You got it. Thank you, Ms. Studies and I wanted to ask if there has been a shift with regard to in parts substitution is industrialization.
This is now being of the pass. I don't know why it's not working. If this is now a thing of the past or if now all of the policies, industrial policies are more focused on exports.
So how has this changed? Are we still seeing some policies similar to those in the sixtys and seventys and eightys or is this truly a new paradigm?
Okay.
Thank you. Thanks. Okay, right down here in front. Our guests from China, on you, has the question.
Yeah, I wonder if the speakers can come comment more on the global economic governance because WTO has been brought up several times in your talk.
And in my impression the WTO has been promoting kind of cookie Cookie-catar approach to free trade and free market.
But now, somehow, there seems to be more space or less space to allow developing countries to thinking about better ways to creating domestic industrial capacities.
So I wonder like how do you map out the global economic governance and where are who are the drivers of the debate and what are the drivers of the debate and what are the kings, agents and institutions.
Thank you.
Okay, I'm being a bit naughty. There is one student who's online, Nateen.
And if Nadine could just ask her question very, very quickly, I'll allow you.
Oh, I that? Hi, Nancy.
Hello? Can't hear me. Can you hear me? Okay.
Yes, please, please ask your question.
Alright, so, my question is about agri, ological practices. Do you think it is feasible for African economies to specialize in agricultural practices given their sustainability and their ability to have livelihoods.
Is this something that's scalable for industrial purposes?
Okay, thank you very, very much.
No, this point is not clear.
So I think the question was. You know, about agro ecological, so more environmentally friendly agricultural practices.
Is this a kind of realistic part of a kind of I guess industrialization of freshness or You know, how do we integrate that into industrial policy?
So do you want to start a so-called acupoint this time?
Yeah, I will, pick 2 questions and reach out. Can answer the 2 other questions. First one on agriculture.
Yeah, I think agriculture has a big potential because our culture is not just one sector. It has also various industries that.
Brought sector. So the key, with the the challenge with many developing countries, especially in Africa, has been there has not been a consistent policy that puts agriculture as part of the broader transformation or in a way putting transformation of agriculture as a key priority.
And what are the, I mean, the, if we look at the environmentally friendly agriculture.
The first thing is it's Africa's agriculture that is the most vulnerable. From the continents resource and even from from global perspective.
So with the current, technology with the current practice of agriculture, we are not going to sustain it.
So there is a need when we talk about environmental, sustainable, we mean about soil conservation. About water conservation and water saving.
We mean about using modern technology using organic, models, and also intensive, intensive farming.
Is a key, modality. One of the new technologies in agriculture that is evolving is this mass code.
Regenerative and vertical farming in many places. So. We are moving that we have to move in that direction and then we have to do that in view of the worsening climate change as well.
On the ISI. The imports, industrialization and exports. Later industrialization.
From my perspective, It's a dichotomy. There are some sectors where which are more, that could be considered traded.
Which could be exported across borders. And there are also some, let's say, Goods that are.
Not treatable, but that are important for a domestic market like summit is an unthreadable code.
But the key point, in terms of policies Some governments, for instance, try to address the issue of for in exchange shortage.
Bye trying to prioritize and And, manage the existing resource. And also focusing on imports. But the big dilemma is If poor substitution cannot be assassined.
If it's isolated from productivity and productivity is linked with with scale, increasing scale is the one that ensures that goods are being provided.
In a most competitive way and then cheapest way. So I don't think any country Who is the current economic structure?
Can only follow imports of position industrialization. That's why we need to emphasize. Linking it with with exports.
And we have also to link it with the macro economy issue which are which are tied. Now many African countries are are victims of this gift stress.
And the main problem with depth is not generating the money to pay. The most the biggest bottleneck is the foreign exchange.
So, and it has to be repaid in, for in exchange. Which means that every single country should be able to generate for in exchange because that's what is going also to limit.
The gross potential. So. And.
Oh. Okay, I want to go to Richard because we are kind of out of time, but thank you very much.
So Richard Do you want to take the last couple questions?
Good. Okay, very quickly. Just on agriculture, the answer is don't leave it to Bill Gates and his way of thinking if you worry about food insecurity.
And so that's the place to start there. Look, I'm the global government. There's a there's just a uniform problem of the lack of representation of developing countries.
In the framing of the global governance challenge. That's particularly acute in the Washington based institutions.
And that's not only in terms of of voting power and other things it's also it's visible in the way in which the heads of those institutions have for the last 80 years been a divided up between advanced economies where the US takes the World Bank and the and the Europeans take the IMF and and and so there's a real representational problem with the So called rules based economic order that we need to
address urgently if we're going to rebalance multilateralism in a way to address these multiple problems.
You know, I mean China China, I think China's rise has Force that onto the agenda. Although China itself is underrepresented in even the size of its economies, massively underrepresented, in those areas.
The WTO is a little different. I think developing countries, not strictly speaking WTO is one country one vote so it's not like the IMF and the World Bank in that sense.
But developing countries simply don't have the capacity, many of them, particularly smaller ones, to actually be able to manage the rule book of international trade, multilateral regional and bilateral and they're overwhelmed actually in many respects.
And we're going to need, we need a serious, I think getting back to basics when it comes to trade.
The rules of the international trading system. So that's about something that should be done. With
Okay, Richard, I'm sorry, but I think we do have to stop, but thank you both so very much for coming and talking to us.
I, you know, you've given us such a good overview and also lots of specific cases for the students to look up.
So we're enormously thank you thankful to you. I do want to share that next week we have our final cutting edge lecture which is called What the Gene Editing Revolution Means for Rural Welfare, Global Futures and Social Justice.
Very much building on the last points about the role of agriculture and transformation. And in future we also have a series of lectures by some alumni of the programs at the LSE and ID which will start on Monday and they're going to be talking about their work but also about their experiences sort of getting jobs within the development sector after LSE.
So just finally, I'd like everybody to just thank our wonderful speakers for giving us such a wonderful lecture.
Okay.
It's on mute, James. But thank you both so very much and I hope to see you in London as you're both coming through. And I hope to see you in London as you're both coming through very soon.
So thank you.
I can do that.
Thank you, thanks a lot.
Thank you very much. Thank you.
Thank youBye bye