rethinking the sequence of development
TRANSCRIPT
![Page 1: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/1.jpg)
Rethinking the Sequence of Development
World BankBook Discussion
December 16, 2016
![Page 2: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/2.jpg)
Two Universal Themes
1) Rethinking the sequence of development Good governance first? Growth first? Or something
else?
2) Creating the right conditions for adaptation What are these conditions? Can they be created?
Where and at what level should they be created?
![Page 3: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/3.jpg)
My Focus Today
1) Rethinking the sequence of development Good governance first? Growth first? Or something
else?
2) Creating the right conditions for adaptation What are these conditions? Can we create them? In
what places should these conditions be installed?
![Page 4: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/4.jpg)
the chicken-and-egg (endogeneity) problem
of development
![Page 5: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/5.jpg)
Economic Wealth
Good governance/strong
institutions
![Page 6: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/6.jpg)
![Page 7: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/7.jpg)
Economic Growth
Good/strong institutions
#1: Prosperity leads to strong institutions(policy: give generous aid, no strings attached)
![Page 8: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/8.jpg)
Economic Growth
Good/strong institutions
#2: Strong institutions lead to prosperity(policy: replicate suite of strong institutions in poor, weak nations)
![Page 9: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/9.jpg)
The imposition of good governance standards
“has been a root cause of the deep problems
encountered by developing countries.”
(Pritchett & Woolcock)
![Page 10: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/10.jpg)
Economic Growth
Good/Strong Institutions
#3: History bequeathed strong institutions that led to prosperity (aka “path dependence”)
Favorable History
![Page 11: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/11.jpg)
“Once society gets organized in a certain way, this tends to persist... This persistence also explains
why it is so difficult to make poor countries prosperous.”
In short, poor countries are
STUCK.
![Page 12: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/12.jpg)
Conventional wisdom: Development is a linear process.
In reality: Development is a coevolutionary process.
![Page 13: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/13.jpg)
Preview of my approachA simple—but not simplistic—
way of understanding development as a complex
process
![Page 14: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/14.jpg)
Step 1:
Harness existing weak institutions to
build markets
Step 2:
Emerging markets stimulate strong
institutionsStep 3:
Strong institutions
preservemarkets
![Page 15: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/15.jpg)
Spark change in poor societies by leveraging what they
already have…not with what we wish they could have.
![Page 16: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/16.jpg)
THE CASE OF CHINA
![Page 17: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/17.jpg)
![Page 18: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/18.jpg)
Designing Fieldwork to Map Coevolution
Present
Economic reform X
Firm structure X
Investment policy X
Bureaucratic function X
Bureaucratic finances X
Monitoring mechanisms X
T1 T2 T3 Present
Economic reform X X X X
Firm structure X X X X
Investment policy X X X X
Bureaucratic function X X X X
Bureaucratic finances X X X X
Monitoring mechanisms X X X X
Single snapshot Sequence of snapshots
![Page 19: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/19.jpg)
Forest Hill City, Fujian Province
![Page 20: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/20.jpg)
![Page 21: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/21.jpg)
1993: Central government accelerated market liberalization
Establish a specialized, professional investment
agency
![Page 22: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/22.jpg)
Developmental States Require Weberian Agencies
DPM Teo with state-selected and sponsored
EDB scholars
![Page 23: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/23.jpg)
1993: Central government accelerated market liberalization
Adopt en masse,
personalized investment promotion
Establish a specialized, professional investment
agency
OR
![Page 24: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/24.jpg)
Not Specialized (En Masse)
Agencies (partial list only) InvestmentTarget
(Million)
Investment bureau 50
Office of people’s congress (legislature) 10
Department of discipline 10
Health bureau 50
Environmental protection bureau 10
Family planning bureau 50
Handicapped association Encouraged
County document indicating targets assigned to all agencies
![Page 25: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/25.jpg)
Not Impersonal
Local cadres in ALL agencies mobilize personal connections to court investors
High personal stakes: generous bonuses and tough penalties
“Basically we rely on personal networks to attract investors.
Whenever we meet our relatives and friends, we urge: hey, come
to my county!”
![Page 26: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/26.jpg)
The Wrong Bureaucracy?
Plenty of room for corruption and special privilege
Conflict of interest: regulation vs. courting investment
Uncoordinated, low-quality investments
![Page 27: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/27.jpg)
1993: Central government accelerated market liberalization
Adopt en masse,
personalized investment promotion
Establish a specialized, professional investment
agency
OR
![Page 28: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/28.jpg)
GOALS.
CONSTRAINTS.
RESOURCES.
Conditions of a Market-Building Context
![Page 29: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/29.jpg)
1993: Central government accelerated market liberalization
Establish a specialized, professional investment
agency
Adopt en masse,
personalized investment promotion
ORGOAL“In the past, our goal was to
push for rapid economic growth, so we welcomed any
investor.”
![Page 30: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/30.jpg)
1993: Central government accelerated market liberalization
Establish a specialized, professional investment
agency
Adopt en masse,
personalized investment promotion
ORCONSTRAINTS
Bureaucracy left over from Maoist era. Can’t fire anyone.
![Page 31: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/31.jpg)
1993: Central government accelerated market liberalization
Establish a specialized, professional investment
agency
Adopt en masse,
personalized investment promotion
ORRESOURCE“Businesses invest here
because of personal relationships.”
![Page 32: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/32.jpg)
Back then, our commercial parks had no plan. A tofu factory sat beside
another factory making fiberboards. How was that going to work?
![Page 33: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/33.jpg)
Prior to 2003, work reports emphasize
“speed” and “expansion.”
Word “quality” first appeared in 2003
“Quality and quantity” in 2006
“Quality” appeared in first line in 2007
![Page 34: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/34.jpg)
Agencies evaluated by amount of investments…
Then by number of projects that exceeded certain scale
Then by number of projects in state-selected sectors
Investment targets abolished altogether
![Page 35: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/35.jpg)
![Page 36: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/36.jpg)
Evolving Goals of Development at Middle-
Income Stage
Seek to diversify economy
Build services sectors
Major local companies invest outward
![Page 37: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/37.jpg)
Humble County, Hubei Province
“We could not attract investors during the 1990s and early 2000s because nobody knew this place.”
What About Other Parts of China?
![Page 38: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/38.jpg)
Domestic Investment in Central Provinces
Domestic investment in Hubei province
Total domestic investment in five central provinces
(billion yuan)
Total FDI to China(billion yuan)
2008 95 836 1,045
2011 338 1,624 1,706
+355% +194% +163%
For more on the evolution from foreign to domestic investment flows, see Chapter 6 (“Connecting First-Movers and Laggards”)
![Page 39: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/39.jpg)
In essence, what’s the simple—but not simplistic—
story of development?
![Page 40: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/40.jpg)
Step 1:
Harness existing weak institutions to
build markets
Step 2:
Emerging markets stimulate strong
institutionsStep 3:
Strong institutions
preservemarkets
![Page 41: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/41.jpg)
Cross-national extension of theory
Late medieval Europe:
Communalproperty rights
Antebellum United States:
Risky taxless financing schemes
Contemporary Nigeria: Piracy as
distribution channel
For cross-national comparison, see Conclusion (“How Development Actually Happened Beyond China”)
![Page 42: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/42.jpg)
Miraculously, Nigeria produced world’s third largest film industry—Nollywood—within 20 years,
with neither state support nor IPR protection. How did this happen?
![Page 43: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/43.jpg)
Step 1:
Filmmakers leverage piracy as marketing and
distribution network
Step 2:
Emerging markets stimulate demand for quality production +
increased formal funding
Step 3:
Formalization + digital distribution preserves
market
![Page 44: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/44.jpg)
Policy Implications & Connections to World
Development Report 2017
![Page 45: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/45.jpg)
Policy Implications
1. Learn to leverage existing—seemingly weak—institutions to build markets in developing countries. Start by building a bank of concrete case studies, so that we may think
the unthinkable + generate cases/data for comparison.
“Weak” institutions: indigenous, traditional, local norms, low-cost, poor-oriented… piracy, corruption, non-Weberian, non-legal, non-democratic
![Page 46: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/46.jpg)
Policy Implications
2. Distinguish between “market-building” and “market-preserving” institutional bundles. Go beyond single universal benchmark that ignores stages of
development
WDR 2017: “Need to move away from aggregate indicators”
Think about institutions functionally, rather than normatively (think: a hammer is not an inherently better tool than a screwdriver).
![Page 47: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/47.jpg)
Policy Implications
3. Identify key agents of change, and design conditions—meta-institutions—that facilitate adaptation among them Meta-institutions: “Meta-institutions are higher-order structures and
strategies that facilitate adaptive and learning processes” (CH 2, pp. 57).
WDR 2017: “Creating conditions for adaptability.”
For more, see Chapter 2 (“Directed Improvisation”) in my book
![Page 48: Rethinking the sequence of development](https://reader033.vdocuments.mx/reader033/viewer/2022042706/5870e30e1a28abcf288b517d/html5/thumbnails/48.jpg)
Thank You