A VIABLE GROWTH STRATEGY

DEGLOBALISATION AND TECHNOLOGICAL CHANGE HAVE ACCELERATED THE SEARCH FOR VIABLE ALTERNATIVES TO EXPORT-LED DEVELOPMENT

- Amrit Amirapu & Arvind Subramanian

With the spectre of deglobalisation looming large, developing economies are scrambling to devise new growth strategies. The most effective path to development in recent history — specialising in export-oriented, unskilled labour-intensive manufacturing — now appears to be blocked.

The model that once propelled the economies of South Korea, Taiwan, Singapore, China, and Vietnam is becoming less accessible for countries in South Asia and Sub-Saharan Africa.

What made the traditional development model so successful was its reliance on exports, which enabled countries like South Korea to tap into virtually unlimited global demand, freeing them from the constraints implied by narrow domestic markets. Exporting also fueled supply-side efficiency, and reliance on unskilled labour meant that the benefits of growth were widely shared.

Another key strength of the manufacturing-led growth model was that it ensured productivity gains were aligned with available labour resources, largely owing to the learning-by-doing dynamic that enabled countries to boost efficiency within existing sectors while gradually moving up the value chain. Economies could start with low-productivity exports and, as the workforce became more educated, shift to more skill-intensive and sophisticated export sectors. Consequently, growth was both rapid and inclusive, and thus more sustainable.