The new era for the Chinese economic development started in 1978 when the Chinese leader Deng Xiaoping visited Thailand, Malaysia, Korea and Singapore to see ‘how they did it’. After his return to China, Deng turned the page of history and set China on a path of uninterrupted growth for the next three decades, until today (Blankert Jan Willem, 2009). China’s economic development resulted from a nexus of factors, some of which: low cost of labor, exports, foreign direct investments (FDI), and a developing consumer market. Of these, exports and FDI have historically been the most important, while in the future the growth of the consumer market is thought to be critical to China’s continued economic development (James K Yuann and Jason Inch, 2008).

Today, China has 19% of total world population with more than 1.3 billion people. In the fast growing economy, the Chinese population has rapidly advanced as consumers and substantial emerging as a wider middle class. In spite of the fast economic growth and reduction of poverty, still, more than 500 million people live with less than 2$ per day. China is also confronting itself with scarce resources and long-term growth will necessarily entail China consuming a much larger share of the world’s natural resources, which will probably have a permanent effect on global commodity markets.

In this context, the importance of the Chinese government is crucial. The government has a key role in the economy, since it maintains state control over the strategic sectors of the economy and retains ownership over a core group of enterprises in the finance, communications, energy, resources, and media sectors. Nonetheless, in the last years, China became one of the favorite places for foreign investors, attracted by government incentives and special conditions, as well as the existence of logistic platforms and inter-continental transportation.

The neo-liberal mainstream thought prescribes the transition to a more market-oriented economy as the solution for sustained growth. On the other hand, the approach is highly criticized by scholars who argue that China’s model of growth does not adhere to neo-liberal principles. Nevertheless, the transition is laden with risks, and the greatest one is moving away from an export-oriented growth, the model that brought China’s economic success.

China’s recent policies emphasize domestic demand and better social inclusion policies. Also, there is an emerging consensus in China around the importance of consumption: the development of a domestic demand is thought to be a new source or even the main engine for China’s long-term economic growth.

Furthermore, to expedite the growth of domestic demand, China’s government continued to introduce a steady stream of measures to encourage consumption. The government is hoping that if it can get people to spend ‘furiously’, it can make consumption the new engine for China’s growth. Currently, the Chinese consumption accounts only for about half of China’s GDP compared with two-thirds in most developed economies.

Nevertheless, China’s interdependence with other countries affected by the economic slowdown limits the assumption and increases the uncertainties whether China will become the world largest economy. However, the greatest dilemma that the government is confronting with is whether a growing buying power will mean growing demands for rights and whether a growing Chinese middle class will eventually mean democracy.

Resources

“China Rising“, Blankert Jan Willem, 2009.

“The pattern of growth and poverty reduction in China”, Montalvo, Jose G. Ravallion, Madrid- Journal of Comparative Economics, 2010.

“Governing Rapid Growth in China”, Kanbur Ravi, 2009.

“Super trends of future China”, James K Yuann and Jason Inch, 2008.

“China as the World Factory”, Zhang Kevin, 2006.

“Can China’s Growth be sustained? A productivity Perspective”, Zheng Jinghai, Bigsten Arne, Hu Angang, World Development; Apr2009, Vol. 37 Issue 4, p874-888, 15p.

About the author: Madalina Bouros has just graduated a MSc in International Business at Aarhus School of Business, Denmark and she has a BSc degree in Economic Management from the Academy of Economic Studies, Bucharest. Currently, she is working in business development in Washington DC. She is passionate about economic development and emerging markets.

Amid fears of food diversion, the EU Commission reached an agreement with the North Korean government to establish unprecedented monitoring procedures. World Food Programme (WFP) will be in charge of managing and monitoring the delivery of the EU food aid, while the experts have been promised unrestricted access to check that aid reaches its intended recipients. In dealing with the authoritarian government, the EU Commission is determined not to compromise the fundamental humanitarian values. However, the same values: neutrality, impartiality, universality, independence are mostly challenged when humanitarians need to negotiate access to the affected people with the ones who govern.

Meanwhile, the USA and South Korea have responded quite differently to the crisis. Until a “monitoring system” is put in place, any food shipment will end. Another major challenge is whether denying such aid would increase, as a result, the responsibility of the government to redirect scarce funds from military expenditures to draught-affected areas. Yet, while the political leaders are risking playing “politics with poverty” and using food aid as a tool for foreign policy, the humanitarian community is calling for immediate action, amid growing hunger.

Sources:

Europa

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/826&format=HTML&aged=0&language=EN&guiLanguage=en

eGovmonitor

http://www.egovmonitor.com/node/42634

LA Times

http://www.latimes.com/health/la-fg-north-korea-food-aid-20110708,0,215012.story

On the author: Diana Tonea has graduated the London School of Economics with an MSc in Development Studies. She has professional experience in programme support and emergency response operations, most recently with the Emergency Response Unit in the European  Commission Directorate General for Humanitarian Aid and Civil Protection (DG ECHO) in Brussels. Previously, she worked on Early Recovery for UNDP/BCPR (Bureau for Crisis Prevention and Recovery) in Geneva. More recently, she started working as an independent research collaborator for CEIRI (Centro de Estratégia, Inteligência e Relações Internacionais) in Brazil, publishing articles on EU Development Cooperation and EU Humanitarian Aid.

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Today India’s economy is the world 10^th largest by nominal GDP (Gross Domestic Product) and 4^th largest by PPP (Purchasing Power Parity). Moreover, it is the world largest democracy with more that 17% of total world population. Since 1991, India’s economy has been growing at an approximately annual rate of 8%, however, since 2004, a new momentum has propelled India into a rapid growth and infrastructure development has become a key to the country’s future growth consolidation. Meanwhile, economic integration is still an unsolved problem, rooted in the country’s divided societies.

The positive trends are showing that India’s economy is growing and is growing fast. By 2030, India’s economic development is expected to continue and become the world 3^rd largest economy after China and US, with a GDP five times higher than now. However, when looking at the problems that India’s has to solve, continuous growth is not going to be an easy process. India is forecast to have 270 million people net increase in working-age population and 68 cities with more than 1 million people (Sankhe, 2010). While the world’s population is getting older, India’s population boom could turn into a “demographic dividend”. Nevertheless, if not properly managed, the growing population can easily turn against India’s economic growth, as it should be integrated in the economic sector and matched with education opportunities and job creation.

The infrastructure too has to be improved in order to sustain the economic growth. According to the World Bank (in Henderson, 2010):“For a better economic development, India needs to give due priorities in various issues like infrastructure, public sector reforms, agriculture and rural development, reforms in lagging states, removal of labor regulations”. A better infrastructure will, most likely, facilitate rural-to-urban migration and in this way accelerate urbanization. Even though today India has very big cities, the percentage of urban population is less than 27%, compared to the world average of 50%.

Economic development can generate employment opportunities, increase disposable income and speed up urbanization. Yet, the process has been slow because the manufacturing sector still fails to employ the unskilled labor force and generate the missing middle. As a result, the share of rural population employed in agriculture has increased to 60% of the total population. Since 2004, the situation is slowly changing and India’s rural to urban migration is driven both by push and pull factors. Deteriorating agricultural productivity, cast barriers and unemployment in villages pushes rural inhabitants to the cities. Meanwhile, better opportunities in the cities, infrastructure development and stories of other migrants pull rural workers into urban centers (Poddar and Yi, 2007).

In this context, I urge the reader to explore the following questions: is India’s economic development going to slow down or, surpass China’s? How will India overcome its internal problems and achieve sustainable development? And will India’s economic growth mean inclusive growth? Indeed, these questions reflect the fact that development, despite its strong dynamics, is still loaded with uncertainties.

Bibliography

1. Chandrasekhar C P, Ghosh Jayati (2006), “ The “Demographic Dividend” and Young India’s Economic Future”, Economic and Political Weekly.

2. Vernon, Henderson (2010), “ Urbanization in Developing Countries”, The World Bank Research Observer, vol. 17, no.1 (Spring 2002), pp 89-112.

3. Utsav, Kumar (2006), “India’s Pattern of Development: What Happened, What Follows?”, International Monetary Fund.

4. Tushar, Poddar and Eva , Yi (2007), ”India’s Rising Growth Potential”, Global Economic Paper No, 152.

5. Shirish, Sankhe ( April, 2010), “ India’s urban awakening: Building inclusive cities, sustaining economic growth”, McKinsey Global Institute.

About the author: Madalina Bouros has just graduated a MSc in International Business at Aarhus School of Business, Denmark and she has a BSc degree in Economic Management from the Academy of Economic Studies, Bucharest. Currently, she is working in business development in Washington DC. She is passionate about economic development and emerging markets.

La coopération roumaine au développement. Exercice d’approche goffmannienne

L’objectif de notre mémoire était de comprendre comment un pays, en l’occurrence la Roumanie, passe du statut d’aidé à celui d’aidant. Le 1er janvier 2007 celle-ci intègre en effet l’Union Européenne. Faisant partie de l’acquis communautaire, la coopération au développement en tant que donateur et concepteur commence dès lors officiellement pour la Roumanie. Préoccupée pendant des siècles à rassembler puis égaliser (parfois brutalement) ses trois régions historiques que sont la Valachie, la Moldavie et la Transylvanie, voilà la Roumanie confrontée à un nouvel horizon : soutenir la réalisation des Objectifs du Millénaire pour le Développement (OMD) dans le « Sud ». Mais lorsque l’on sait qu’elle a eu, elle aussi, son rapport des OMD pour 2008, on prend conscience que ce chantier constitue un vrai défi.

Devant cette situation nouvelle, il nous semblait pertinent d’avoir recours à l’anthropologie du développement telle que mise en oeuvre par Olivier De Sardan. Il nous paraissait en effet intéressant d’analyser comment les divers acteurs locaux réinterprètent ce projet en pleine construction qu’est « la coopération roumaine au développement ». Mais dès le début de notre terrain de deux mois, il nous est apparu qu’au-delà des intérêts et des valeurs des uns et des autres, les différentes rencontres que nous observions semblaient répondre à une dynamique propre qui imposait à tous la mise en scène d’une représentation codifiée. Si les protagonistes ne se privaient pas pour saisir les opportunités existantes, ils devaient respecter certains interdits et se plier à des contraintes de figuration.

Plongeant dès lors au coeur des interactions entre les acteurs du champ, nous avons eu recours à un des concepts clés du sociologue Erving Goffman : le faceworking. Après avoir présenté notre cadre théorique ainsi qu’un panorama de la coopération roumaine au développement, nous nous sommes alors attelés à démontrer que si tous les protagonistes tentent de réaliser leurs stratégies, ils ne peuvent le faire qu’en maintenant chacun une face vis-à-vis des autres. Les rencontres entre deux institutions devenaient alors également contraintes par une dynamique propre à l’interaction, dynamique qui a peut-être été sous-estimée.

En effet, si la littérature sociologique et anthropologique a souvent analysé les rôles et les statuts des institutions, la manière dont naît un nouveau rôle/statut est tout aussi fréquemment traitée comme une « boîte noire ». Or, cette situation est exactement celle que vit aujourd’hui la Roumanie sur la scène internationale. Prenant à rebours ce changement macro social, la dernière partie du mémoire montre alors comment les interactions à première vue les plus anodines peuvent être au fondement de changements de plus grande échelle.

Tout au long du mémoire, la coopération roumaine au développement apparaît comme une co-construction qui, observée à la lumière goffmannienne, devient une longue chaîne d’interactions ne faisant pas que connecter les individus, mais les liant par la « laisse de l’interaction ». Ainsi, nous avons pu conclure que le passage de la Roumanie de pays aidé à pays aidant n’est pas uniquement façonné par les intérêts et les valeurs des différentes institutions, mais également par l’interdépendance inhérente au faceworking des hommes et des femmes qui les composent.

Merci de me contacter (CodratAlin.Teclu@ulg.ac.be) si vous désirez un exemplaire du travail ou la bibliographie.

About the author: Alin holds a MA in International Development and a BA in Sociology/Anthropology  from the University of Liege, Belgium. He is a Research Fellow at the National Fund for Scientific Research (FRS – FNRS) of Belgium. He is an assistant at the University of Liege where he is monitoring the MA students in International Development in their annual internships in various organizations and institutions. Also, he will be an assistant for the MA in International Development launched this academic year (2011-2012) by SNSPA (National School of Administrative and Political Science, Bucharest).

Is there still a role for industrial policy?

After the WWII many countries saw the industrial policy as a way to facilitate modernization and to catch up with the developed world as well as to improve living standards and the income level of their people. However with few exceptions, the rest of them failed to achieve their goal. Both, the ones who believed in state’s ability to avoid externalities and market failures as well as the ones who adopted market oriented reforms failed to achieve competitive performance.

The neoliberal approach

Liberalization in the developing world came mostly as a consequence of disillusioned import substitution industrialization strategies. The reason why neoliberalism finds it difficult to accept industrial policy lies mainly in the enormous difficulties imposed by its implementation. Appropriate intervention requires perfect information. Pack & Saggi (2006) conclude that in order to adopt the optimal strategy, policy makers would have to posses a huge array of knowledge and skills that should exceed those managed by almost any institution, industrial or consulting firm taken together. For that reason, it is impossible for the government to assume effective and selective intervention and the only viable solution is the efficient resource allocation driven by free markets which allows companies to have perfect information on available technologies.

Justin Lin, Chief Economist of World Bank argues that the rationale behind industrial policy failure was the adoption of the so called comparative advantage defying strategies (CAD) which targeted completely non-viable industrial sectors. As a result, the government support for initial investment was imminent. Direct subsidies, trade barriers, preferential tax systems, reduced interest rates and artificial appreciated exchange rates, all contribute to a distorted price system and misallocation of resources (Lin, 2009).

The structuralist approach

The traditional rationale for selective industrial policy has been made in terms of “market failures” that arise when competitive markets either do not exist or are incomplete, in situations, for example, when there are information asymmetries, scale economies, or externalities (ul Haque 2007). Chang (2003) argues that the neoliberal approach doesn’t take into account the learning and the capacity building which is not immediate, costless or implicit. Learning externalities from exports could justify export subsidies, knowledge spillovers from foreign companies could justify tax breaks for Foreign Direct Investments (FDI), and production externalities in advanced sectors could justify infant industry protection or other measures to expand those industries (Harrison & Rodriguez 2009).

The role of industrial policy

Given the unsuccessful experiences across regions and time frames, I conclude that the reality has not been kind to either of these two directions. Both were right and both were wrong. Markets fail to allocate resources efficiently; governments fail to address the market failures (Chang 2003).

The public opinion now converges to a more “soft – something in between” version of industrial policy to which I myself subscribe. What it reality matters is the close collaboration between the government and the private sector to deliver the type of entrepreneurship in support of long-term economic growth.

In my opinion, the government should adopt a new philosophy based on balanced market-oriented policies, along with an increasing importance to social optimum. The proposal is to move government attention from restrictive policies such as the ones which artificially alter the level of prices to the ones that address the “immiserising growth” (Kaplinsky 2004). With respect to any criticism, I believe that policies which “create a favourable environment for industrialization, such as macroeconomic stability, public provision for education, guaranteed property rights and legal enforcement of contracts” (ul Haque, 2007) are more successful.

On the other hand, the increased importance of value chains and established supplier-buyer networks makes it somewhat difficult for developing country exporters to sell their labour intensive products on the foreign markets. In this case, they have not only to overcome trade barriers, but to integrate as well within such trading networks. Usually developed foreign buyers are the ones who dictate the rules of the game, therefore the risk for the weaker countries to be easily replaced by new and more attractive exporters, is always present. Given the fierce competition among producers to reduce costs and remain attractive to foreign buyers, I believe that governments should pay more attention to domestic industrial development but only through harnessing technological change across clusters and vertical integration. As Kaplinsky (2004) argued, governments have a number of key roles to play: assist manufacturers to recognise the opportunities and threats posed by participating in the global value chains, facilitate their entry and reposition within value chains as Europe did in the ‘80s.

The rise of the advanced developing countries into the international arena has posed opportunities as well as threats for the weaker ones. On the one hand they offer attractive export markets and new FDI potential but on the other hand their exports threaten to suppress infant industries in the latter group of countries. As Lall (2005) and Brautigam (2006) argue, the question is whether the more advanced countries are willing to adopt the “flying-geese strategy” to lower barriers and give way scope for development to the Global South.

Bibliography:

Brautigam, D., 2006. Flying Geese” or “Hidden Dragon” Chinese Business and African Industrial Development. Washington DC.

Chang, H., 2003. Rethinking Development Economics, London: Anthem Press.

ul Haque, I., 2007. Rethinking Industrial Policy. UNCTAD Discussion Papers.

Harrison, A. & Rodriguez, C.A., 2009. Trade, Foreign Investment, and Industrial Policy for Developing Countries, National Bureau of Economic Research Cambridge, Mass., USA.

Kaplinsky, R., 2004. Spreading the Gains from Globalization: What Can Be Learned from Value-Chain Analysis? Problems of Economic Transition, 47(2), p.74–115.

Lall, S., 2005. FDI, AGOA and Manufactured Exports by a Landlocked, Least Developed African Economy: Lesotho. Journal of Development Studies, 41(6), p.998–1022.

Lall, S., 2004. Reinventing Industrial Strategy: The Role of Government Policy in Building Industrial Competitiveness, United Nations.

Lin, J. Y. and Chang, H. J. (2009) The Role of Industrial Policy in Development – audio and video coverage, Overseas Development Institute

Pack, H. & Saggi, K., 2006. Is There a Case for Industrial Policy? A Critical Survey. The World Bank Research Observer, 21(2), p.267.

Rodrik, D., 2004. Industrial policy for the twenty-First Century, Centre for Economic Policy Research.

On the author: Graziela Voica holds an MBA from Stuttgart Institute of Management and Technology and an MSc in International Development from London School of Economics and Political Science. She has several years of working experience both in private and public sector. She worked for three years as a Research Assistant for Fraunhofer Institute and for four years as a Financial Analyst for Voith Hydro. In the public sector, she worked for UNIDO and she has been lately acting as an independent advisor designing training programmes for government officials for a local development consultancy in the Mexican State of Yucatan.