2023 Top five from the GPI
A recap of our top articles from 2023 in case you missed them
2023 was the year India landed a spacecraft on the moon, Taylor Swift boosted inflation, and Twitter, for reasons that remain unclear, became X. It was also the year we launched the GPI. Since April we’ve published 36 articles, covering all manner of topics, from Indonesia’s nickel to East Africa’s secondary cities. As we step into 2024, let’s quickly recap the top five GPI articles from 2023 – and one hidden gem you might have missed. Enjoy!
As the Irish men’s football team will tell you, sometimes you need to lose to win. Supporting industrial development is messy and difficult and fraught with failure. We rightly laud South Korea’s success in cultivating automotive giants such as Hyundai and Kia. But we forget the failures of Shinjin, Asia Motors and Daewoo. Failure is an inevitable piece of the industrial policy puzzle, and effective industrial strategies must accept and even embrace this reality.
Our second most popular article of the year is this ABBA-inspired money lamentation. Italy and Tanzania are two similarly peopled countries, with populations around the 60 million mark. But for every dollar the Tanzanian government has to spend on public services, the Italian government has 49. In countries like Tanzania, it’s impossible to escape the hard reality that there just isn’t enough money. No matter how sensible the spending, this won’t change without transformational growth.
Famed economist Ha-Joon Chang compares industrial policy to his children, with tongue only slightly lodged in cheek. Rather than cast them off into the labour market at age 5, he sends his kids to school. To be able to compete in the world, his children need to learn valuable skills from knowledgeable teachers. The same is true for low-income countries wanting to develop productive industries. Any country trying to develop a car industry by going it alone will be doomed to fail. Examples from South Korea, Bangladesh and China show the need to beg, borrow and steal your way to industrial policy success.
“To make stuff, you need to know how to make it.” Ricardo Hausmann’s insight might seem obvious but it’s important. When it comes to building industries, capabilities are key. And these capabilities are best learned by doing. You can’t play for Real Madrid by reading a book about football. As this article (co-written with Kartik Akileswaran and Jonathan Mazumdar from Growth Teams) argues, moving brains is faster than moving information into brains. And so emerges the grey matter migration development strategy. Skilled labour mobility can play a central role in spurring the growth of key industries in low-income countries, yet it remains criminally overlooked.
One fact about high-income countries that might surprise you is that they have very few entrepreneurs. Low-income countries, on the other hand, have lots. A given worker is about 7 times more likely to be self-employed in a poor country than a rich one. This is a problem because economic development happens when large businesses bring lots of people together to perform what Paul Collier calls a “productivity miracle”. In this sense, Africa’s economic development failure is a failure of business scale up. The self-employed as a share of total employment across the continent has fallen by less than 3 percentage points in the last three decades. The uncomfortable truth about business scale up is that we just don’t really know how to do it.
Hidden gem: Africa’s Pensions Pitfall
Africa’s much discussed demographic dividend is a gift and a curse. Having lots of young people means an abundant labour force now but a tsunami of pensioners in 50 years’ time. Only about 14% of sub-Saharan Africans are saving for old age, compared to more than 50% in high-income countries. Progress in formal schemes won’t be enough to bridge the pensions gap. Innovations in micro-pensions will be important, but what the region really needs is economic growth. As countries become richer, their financial systems mature, the formal sector grows, and people have more money to set aside for a pension.
There you have it. We’d like to thank all our subscribers for their support as early adopters! We’re looking forward to bringing you more insight and analysis in 2024. If you’ve got suggestions for what you’d like us to write about or if you’d like to just get involved, please get in touch at email@example.com.
The GPI is run entirely on coffee. If you’ve found our articles valuable in 2023 and would like to support our work, then you can buy us a coffee here.
Bonus article: Intra-Africa Trade: Breaking Down Walls for Economic Growth
For those interested in the ongoing and coming discussions around AfTCFA, we discuss some of the potential strategies and pitfalls.