Services offer a clear and speedy path to economic development

We must reject the false choice between supporting services and promoting manufacturing. Policymakers need to do both

- INDERMIT GILL & AADITYA MATTOO

For developing countries around the world, especially the poorest, the economic terrain has seldom been so slippery. Low-income countries have already suffered a lost decade, with virtually zero per capita income growth since 2010. Many middle-income countries are coming to terms with a demographic shift that puts them at risk of growing old before they grow rich. And many high-income countries risk stagnation because of sky-high debt and anaemic productivity growth.

Such conditions are not conducive to international comity, at least not of the kind that fuelled so much progress after the fall of the Berlin Wall in 1989. Developing economies will need to get better at fending for themselves, and while some are already preparing to do so, they are operating with an antiquated policy framework.

In the third decade of the 21st century, does it really make sense for developing countries to place an all-or-nothing bet on manufacturing? New research from the World Bank shows clearly that it does not. Developing countries would do far better to put services in the lead role, with manufacturing and agriculture serving as the supporting cast.