Climbing the Economic Ladder

Harvard economist Dani Rodrik gives a very short talk (30 minutes) entitled "Why do some poor countries remain poor while others grow rich?" As he points out, he doesn't actually know the answer to this. He admits that the title was a "teaser" to get conference attendees to come to the talk.

What he does talk about is how economists think about the issues of international development. Towards the end of the talk he focuses on Turkey (where the conference is held) and points out that the problem in Turkey is not a failure to "innovate" or develop R&D. It is more structural. Lagging countries usually have a mix of economic enterprises. The best growth strategy is to remove impediments to the growth of the best, most productive parts of the economy to help lift the country up out of poverty. This is actually a "good news" story. It says you don't have to sink large funds into education or infrastructure development or do wholesale structural transformation to remove "crony capitalism" or other broad structural impediments. The simpler approach is simply to facilitate the growth of the better parts of the economy. In other words, growth is held back because backwards parts of the economy that are protected. What a poor country should focus on is making structural changes to remove structural favoritism of backwards parts of their economy and, instead, do limited structural changes to favour the more successful parts of their economy.

The talk is fun to listen to because he stays away from the arcane aspects of economics and speaks clearly because he is addressing a general audience interested in development, not specialists in economics. As well, this is a hopeful, positive talk saying that poor countries can close the gap with the rich and without terribly dramatic restructuring.